Well over a decade ago, UN Secretary General Kofi Anan and a group of the world’s largest institutional investors launched the Principles of Investment. The Principles sought to encourage funds to integrate environmental, social and corporate governance impacts into their investment decision-making.
At the time, the Secretary General said:
“These Principles grew out of the understanding that while finance fuels the global economy, investment decision-making does not sufficiently reflect environmental, social and corporate governance considerations – or put another way, the tenets of sustainable development”.
16 years on, environmental, social and corporate governance (ESG) considerations in investment seem ever more relevant, as society is at last waking up to the realities of the climate challenge we’re faced with.
A growing market
The ESG investment market is growing. The number of assets held in funds following responsible strategies saw an increase of 25% between 2014 and 2016 and, according to the FT, assets in funds that incorporate ESG metrics grew by 15% during the first six months of 2019.
This is great news for businesses in the clean and green space. It’s a reflection of the strength of the responsible business movement, and that finance markets are sitting up and realising what we’ve known for a long time – that businesses of the future must tread lightly on the planet and minimise their environmental impact if they are going to succeed.
One reason for the market’s growth is the move away from negative screening – where ethically-driven funds simply exclude investment opportunities that don’t meet their ESG criteria – to a wider recognition that ESG investing make business sense.
ESG metrics are now seen by many in the industry as an important predictor of an investment’s long term growth prospects. It’s no longer an ethical decision; it’s a commercial one too.
The ever-increasing number of funds that require strong ESG performance means that businesses looking to raise investment are increasingly driven to:
- Find innovative ways to respond to climate change
- Understand and improve their supply chains
- Ensure workers’ are treated well.
Thinking about investment?
If you’re a clean and green business considering raising private investment, Clean Growth UK offers an investment-readiness service that helps you prepare you to pitch your proposal to investors. We’ll benchmark you using our Investability Index, and then provide you with bespoke support to help you strengthen in the areas that you need to.
Visit our Investment Readiness page to find out more.