It seems that the world of investing is showing a greater responsibility for social and environmental changes in 2021 – and it’s got a lot to do with Covid. Since the pandemic began, there has been a notable rise in investments in businesses that meet environmental, social and corporate governance (ESG) criteria. And according to Refinitiv, this newfound sense of responsibility is a trend that will keep growing in the years to come.
‘Covid has highlighted the urgency to combat climate change and social inequality,’ says Helene Li, CEO of GoImpact. She also points out the effect of younger investors jumping into the industry: ‘Millennials bring with them a ‘sense of responsibility to concentrate on value-based investments.’
So, what will this mean for the future of investing?
The social impact
There were a record number of investments in ESG funds throughout last year, as Covid caused investors to re-evaluate where they wanted their money to go. 2020 was also a year which marked the start of a lot of ESG labels, as the pandemic brought a lot of social and environmental responsibility to the forefront.
This is also the case when it comes to how businesses operate. Svetlana Borovkova, of Probability & Partners, stated that companies will now be judged on three factors when it comes to investors:
- How companies manage their relationships with their workforces
- The societies in which these businesses operate
- The political environment after the pandemic
It seems that in order for companies to thrive in the post-pandemic investment world, businesses will need to take sustainable work practices into consideration, as investors gain a heightened sense of social responsibility when it comes to their money.
Solar power investments outside of the UK
As well as the focus on sustainable business practices, the Guardian have also reported a growing sense of responsibility when it comes to investing in the environment. ‘Green investments’ have taken a hold in 2021, with some currently paying up to 8% interest a year.
One such company is Energise Africa, which was launched by a UK-based company called Ethex and a Dutch crowdfunding platform called Lendahand. It works by investors putting money into bonds, ultimately giving investors the chance to provide ‘life-changing solar home systems to low-income families’ in Africa. The only drawback is that investing in some of the new ESG schemes could be a lot riskier than putting your money in a building society savings account or a bank.
Despite the risks, however, these green investments schemes are becoming increasingly popular, as investors look to ways for their money to have a direct impact on society and the environment. Energise Africa CEO Lisa Ashford has reported an increase in investors since the beginning of Covid, stating that ‘we’ve seen lots of new customers that want to support initiatives that can have a direct benefit on their community or a positive impact on the environment. The recent UN climate report and events such as the Greek wildfires put this into perspective.’
With such an increased focus on our environmental and social impact, it’s likely that investors will see many new or developing ESG companies on the scene for many years to come.