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How ESG Is Changing the Way We Invest | Unpacked Series | J.P. Morgan Insights - YouTube
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environmental social governance is
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growing in every geography around the
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globe it's in the headlines high up on
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the agendas of corporations and at the
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forefront of investor interest
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even though it started to take shape in
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the 1960s esg has gained significant
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momentum in recent years with 2020
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standing out as a milestone year in this
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space
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adoption across the global asset
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management industry more than doubled
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with total esg funds growing more than a
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hundred percent and companies are now
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rallying more ambitious esg goals
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what's driving the move from momentum to
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mainstream
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this is esg investing unpacked
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esg investing looks at an asset like
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equities or bonds through an
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environmental social and governance lens
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the goal is to determine whether the
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asset makes a positive impact for
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example fighting climate change or
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supporting safe working conditions
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governance is all about how a company
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balances stakeholder interests how are
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decisions made what processes are in
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place who benefits
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here's another way to think about it
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the e and s are the end results the g
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determines how these results are
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achieved
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this data helps these investors make
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better informed decisions
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the rise of esg investing is based on a
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few points in history among them are the
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social movements against the vietnam war
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and apartheid in south africa when
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companies face divestments in opposition
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in 1981 the first major u.s organization
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that advanced responsible investing was
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founded the u.s sustainable investment
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forum
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and key events amplified global
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awareness of environmental issues
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in 2008 the financial crisis called into
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question the industry's social license
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to operate how can the financial system
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work for everyone and not just
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shareholders
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in 2015 196 countries signed the paris
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agreement to reduce carbon emissions
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most recently the covid19 pandemic
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demonstrated the connectivity between
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crises public health climate change and
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social inequality
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in response
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companies prioritized even more
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ambitious goals around esg
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three main esg investing strategies are
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growing quickly
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negative screening typically excludes
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investments related to weapons tobacco
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and fossil fuels
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while exclusions were historically based
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on moral or religious preferences now
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it's about the financial risk associated
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with the negative impact of industries
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such as human health for tobacco and
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climate change for fossil fuels
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esg integration has become the leading
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strategy it focuses on how companies
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incorporate esg criteria into their
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daily activities to achieve long-term
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financial performance
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then esg considerations and timelines
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are factored into risk analysis and
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investment decisions moving forward
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impact investing is the newest strategy
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it intentionally aims to create positive
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social and environmental impact that is
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actively measured as well as financial
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return like investing in the private
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debt of a company with a business model
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aimed at providing access to high
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quality education for students from
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low-income backgrounds
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impact investing is becoming
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increasingly common because more people
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want their money to contribute to the
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united nations sustainable development
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goals
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the esg lens can be applied to any asset
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class while equity is the most common
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representing half of total esg assets
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under management green bonds are on the
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rise
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typically purchased by institutional
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investors they help finance a company's
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specific climate-related or
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environmental project
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sustainability linked bonds are also
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gaining traction these are
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performance-based and tied to whether
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the issuer achieves predefined esg
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objectives within a set timeline many
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investors are now looking beyond esg
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targets and are increasingly focused on
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measurable results with clear plans
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this trend along with wanting more of a
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say in a company's esg practices is
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expected to continue for the next
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several years
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heightened regulation including
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environmental employment and civil
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protections is another factor driving
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esg market growth
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around 90 percent of oversight was
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implemented in the last 20 years and 50
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arrived after 2010
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europe leads this effort where public
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companies are required to report
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implemented policies and where
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regulations are constantly evolving to
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reflect broader sustainability goals
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take the eu green deal a set of policies
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to help the eu reduce emissions 55 by
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2030 and reach net zero by 2050
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since sustainability challenges are
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global and require mobilized capital to
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solve them all countries are working on
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esg
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asia is beginning to implement its own
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regulations and the u.s administration
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is currently working on its own
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standards as well
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for the next several years innovation
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will continue to shape the esg landscape
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from advancements in clean energy like
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the growing hydrogen market to how
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companies will deliver on advancing
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racial equality and the upcoming public
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investments in clean infrastructures
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all eyes are on est
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[Music]
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[Applause]
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[Laughter]
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do
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[Music]
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you
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