Environmental, social and governance (ESG) investing will be “the new norm in less than five years”, affirms the CEO of one of the world’s largest independent financial services and advisory organisations. The bold prediction from Nigel Green, chief executive and founder of deVere Group, which does business in 100 countries, comes as Amazon boss Jeff Bezos commits $10bn to fight climate change.
Mr Green notes: “Responsible and impactful investing is already fundamentally reshaping the global investment landscape. “It is the trend that will define the 2020s – so much so that I’m confident that environmental, social and governance (ESG) investing will be the new norm in less than five years.” He continues: “The growth in responsible investing will be driven by demand by both retail and institutional investors.
“Global awareness has skyrocketed about environmental, social and governance considerations over the last 12-18 months, in part due to the activism of the likes of Greta Thunberg, Extinction Rebellion and Jane Fonda, and due to the growing media coverage of climate change and its serious effects.
“As a result, these issues now sit at the heart of the investment decision-making process amongst eight out of 10 millennials, according to a recent deVere survey. Some argue this is likely to be even higher for Generation Z.”
This is of major consequence due to the Great Wealth Transfer. “This will see an estimated $68 trillion pass down from baby-boomers to millennials over the next couple of decades – and it could make them even richer than previous generations. It’s expected that this significant wealth transfer will begin in the next few years,” affirms the deVere CEO.
Currently, the U.S. and Europe lead the charge in ESG investment, with 80% of the responsible-investing market. Asia is currently lagging behind. But, says Mr Green, this could change and will further fuel demand. “By 2025, Asia will be home to 33 of the world’s 49 megacities, according to Global Data. The rise in the number of megacities – cities in which there are more than 10 million permanent residents – will be fuelled by millennials who seem to be fully on board with ESG.”
“In addition, ESG investing will allow governments across Asia to realise some of their wider major policies. These include shrinking labour forces and weakening economic growth, migration, and global low-carbon transition threats.
“Demand for ESG-related strategies will go stratospheric when Asia goes full throttle into this direction, which it will do.”
Nigel Green goes on to say: “As the sector develops around the world, naturally, institutional investors will pile in, bringing with them their institutional capital and institutional expertise. This will act as a further catalyst for the ESG investment arena.”
He goes on to say: “One of the most compelling reasons why responsible investing will be the defining trend in less than five years is due to an increasing amount of evidence and ongoing research that ESG-related strategies can regularly outperform the market. “It would not be unreasonable to assume that those companies that offer ESG-compliant investment could ultimately become some of the world’s most valuable companies. Could they take over from the current big tech firms? I would not be surprised.”
The deVere CEO concludes: “The investment world is evolving perhaps more rapidly than it has in decades due to the rise and rise of responsible and impactful investing.”