What may be the reasons why ESG investments started to soar in 2020?

Investors and the ESG investments

Have you heard of investments that are called ESG? ESG is short for environmental, social, and governance. We are aware that people have different preferences and ways regarding investments. Some people’s highest priority is gaining the maximum profit that they can no matter what. On the other hand, some people actually consider other significant factors like the environment and society. Wait, how did society and the environment enter the picture when we are talking about investments? It may not sound like these three blends in together, but actually, they do. And it is a sight to see when more and more people are making an effort to know and support these types of investments because they actually might mean well.

What are ESG investments, and why should I consider checking them out?

These investments are from companies that follow specific standards for their operations. Today, more and more people are becoming more aware and conscious about how they invest, especially now that we feel the effects of climate change and global warming more. Investors are now constantly checking criteria when they seek potential investments. ESG has three criteria that we will enumerate below:

  1. Environmental criteria. It focuses on how a company makes efforts and works for the environment.
  2. Social criteria. It assesses the company’s relationship with the people surrounding it. It refers to everyone, including the customers, employees, suppliers, communities, and even the janitors in the place where it is located.
  3. Governance. This focuses on the company’s leadership, audits, shareholder right, executive pay, internal control, etc.

The raised awareness in 2020

In 2020, ESG investing made a significant improvement. It is safe to say that it was a great year for ESG investments. ESG products show record inflows that raised to 140%. Data show that massive investors are now aware of ESG principles and began incorporating those when they make decisions about their investments. There was even a survey where most respondents showed that their interest in ESG increased in 2020. 19% of the respondents also said they began using the ESG standards and incorporated them in their portfolios in 2020. As we mentioned earlier, 2020 was a great year for ESG investing.

ESG investments and investors in action

Using ESG standards and principles is one thing and literally, investing in ESG related products is another. There was a survey that involved ESG investors. 62% of the respondents said they’ve been investing in ESG-related products for the last five years, and 21% responded that they have been doing it for a decade now. It does not end there because 67% of them said that they are not planning to stop investing in companies that follow the ESG standards over the next five years. It’s only a survey, but we can already tell the ESG investments have a bright future ahead.

Who supports ESG investments?

Does age affect the way one invests? They say that older people, especially retirees, tend to be more conservative while the younger investors are bolder and handle the risks. But with ESG, age does not seem to be a barrier to have social responsibility. The survey that we mentioned earlier involved ESG investors from different generations. The results showed that the younger investors tend to incorporate the ESG standards more. 64% of the younger generations and the millennials believe that the ESG principles might become the future standard, while 42% of the older generations and the boomer also felt the same way. Generation X investors said that they want to incorporate their values in their investment decisions as they believe that they are voting when they do so.

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