ESG Investing – A Win-Win Model?

Blog

 

Indranil Ghosh provides part one of a two-part series on efficacy and impact of ESG investing. This article pertains to the effects of the coronavirus on ESG investing.

Five years ago, many people dismissed environmental, social, and corporate governance (ESG) investing as a fad because it put purpose alongside profit. But today, ESG investing seems to have become mainstream as global flows into sustainable investing are worth upwards of $4 trillion annually. Furthermore, as the Covid-19 crisis mounted in Q1 2020, investors poured $45.6 billion into ESG funds while $384.7 billion flowed out of the overall fund universe.

According to the UN, the funding gap to meet the Sustainable Development Goals (SDGs) is at least $2.5-3 trillion annually in developing countries alone. We think it’s more like $5 trillion globally. Plugging this gap from the public purse would require a 20% increase in the global tax base, which stands at about $25 trillion today. Clearly, this is not feasible. However, steering a small portion of global private wealth, which stands at $200 trillion globally, into sustainable investments could address the world’s development challenges.

 

Key points in this article include:

  • The problems with ESG investing
  • The additive impact of ESG investing
  • ESG and systems change

 

Read the full article, Does Covid-19 Mark the End of ESG Investing, or A New Beginning?, on LinkedIn.