The world is changing swiftly, and as a result, so are the priorities of investors. Environmental, social, and governance (ESG) aspects are being considered by an increasing number of investors when making investment choices.
ESG investing is an investment strategy that takes into account these aspects in addition to standard financial measurements. As customers grow more conscious of the influence their investments might have on the planet, it has become more crucial for wealth management businesses to include ESG issues into their investing strategy.
Sustainable investment is more than a passing fad. It is an enduring trend that has gained steam during the last several years. In reality, ESG assets under management (AUM) have increased considerably over the last decade.
The Global Sustainable Investing Alliance (GSIA) reported that ESG AUM increased from $13.3 trillion in 2012 to $30.7 trillion in 2018. This is an annual compound growth rate of 12.1%.
ESG investment has become so crucial for a number of reasons. It helps investors to match their assets with their ideals first and foremost. By investing in firms dedicated to sustainable practises and social responsibility, investors may feel good about the global effect of their money.
Also, organisations that prioritise ESG tend to have superior long-term performance. This is due to the fact that they are better suited to manage risk and capitalise on possibilities presented by fluctuating market circumstances.
Sustainable investment is also gaining importance from a legislative perspective. Globally, governments are enacting legislation requiring corporations to report their ESG practises.
This implies that businesses that fail to fulfil particular ESG requirements may risk reputational harm, legal concerns, or monetary fines. As a consequence, investors are increasingly searching for firms with clear ESG processes and a proven track record of sustainability.
Incorporating ESG issues into investing strategies is no longer optional for wealth management organisations. It is essential to satisfy the expectations of customers and being competitive in an industry that is continually evolving.
Companies that disregard ESG concerns run the risk of losing customers to rivals that are more aligned with their beliefs and interests.
In conclusion, ESG investment is a sustainable trend. It is no longer a specialised technique to investing, but rather a practise that is gaining importance among wealth management organisations and family offices.
By adding environmental, social, and governance (ESG) concerns into their investing strategies, businesses may help customers align their investments with their beliefs while possibly earning greater long-term returns.
As the world continues to evolve, the significance of ESG investment will only increase, and businesses that fail to adapt may struggle to remain relevant.
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Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of Maiden Capital. The information provided is meant as a general guide only and should not be construed as investment advice. You should always consult your financial, legal and tax advisers regarding private equity and real estate investments
