ESG, or Environmental, Social, and Governance, is an umbrella term for investing in funds that seeks both positive financial returns and long-term positive impacts. Across the world, employees are already seeing that climate change, gender inequality, rainforest destruction, and weapons are destroying their future. Most would not choose to invest in or profit from that destruction. It is clear that people are eager to become a part of the solution. In fact, 67 percent of millennials would be more likely to contribute, or increase their plan contributions, if they knew their investments were contributing to social good.
Investors have not just taken notice of the financial decline in fossil fuel investments, they have begun divesting from fossil fuels. Assets committed to divestment have leapt from $52 billion in 2014 to more than $11 trillion today — a stunning increase of 22,000 percent. Over 1,110 institutions have now committed to policies black-listing coal, oil and gas.
These include sovereign wealth funds, banks, global asset managers and insurance companies, cities, pension funds, health care organizations, universities, faith groups and foundations.
In 2020, the demand for ESG investment options reached a new high. One of the world’s largest investment advisors, BlackRock, released a 2020 survey that highlights this trend:
- When comparing focus on ESG factors, 88% of global respondents ranked Environment as the priority most in focus amongst those choices today, reflecting the urgency that is present by climate change.
- ESG integration and Exclusionary Screens (the process of screening out specific assets-like fossil fuels) are the two most popular approaches to sustainable investing globally, with 75% and 65% of global respondents, respectively, currently utilizing of considering utilizing these approaches.