The COVID-19 pandemic has taken the world by storm, some economies having plunged into recession and struggling to bounce back. As the world economy slowly recovers, asset managers are bracing for one of the most challenging years as the investment landscape experiences its most significant transformation in recent history. The proliferation of ESG consulting firms is increasingly fuelling demand for impact investments.
At the peak of the pandemic, in March of 2020, a staggering €250 billion got withdrawn from European Funds marking the most significant outflow in modern history. The withdrawals came amid growing concerns over the long-term impact of the pandemic.
Fast forward, the storm has calmed amid an aggressive vaccination campaign that has once again reinvigorated demand for investment products. Unlike in the past, sustainable allocation of funds across environmental, Societal, and governance options is the central theme in what is commonly referred to as s ESG investing.
ESG Consulting firms face an uphill task of responding to the growing demand for impact investments as investors look to invest for a cause in addition to pursuing market returns. Likewise, investment funds are under immense pressure to consider sustainable finance products that investors are increasingly pushing for.
“Money managers will have to anchor sustainability at the core of their investment strategy if they are attracting a good chunk of the 250 billion poised to get its way into the markets,” said Ekaterina Chernova, The Altruist League’s Managing Partner.
The Critical Dimensions That Esg Players Will Have To Watch As Investors Come Back To The Market Include:
Gone are the days when impact investing was only talked about at higher echelons of power or management. Money managers are being forced to anchor ESG investing at the heart of their investments and strategies. With investors recognising the importance of sustainable investments, managers have no option but to focus on sustainable investments.
According to The Altruist League’s President Milos Maricic, “leaders in asset management must show they practice what they preach to woe young investors worried about the impact of their investments.”
Focusing on the ESG framework is the only way asset managers will differentiate themselves from the crowd and attract a big pool of impact investors.
While the focus is expected to be on ESG investments, transparency will also need to be top-notch if ESG players attract investors. Given that ESG investing is still in the early stages of growth, ESG players and ESG consulting firms will have to do more to simplify the acronyms and jargon about sustainable investment.
Likewise, the players must adhere to disclosure obligations on all investment products tagged as ESG compliant. Besides, they will have to develop ESG reporting frameworks that meet the transparency level required by clients.
Deliver on Sustainability
While the focus for the longest time has been on investment products that meet market returns, ESG players will have to do more to convince investors that their products truly meet the sustainability threshold.
ESG investors want strong assurances that their capital will not only generate significant market returns but also go a long way in having a substantial impact on environmental, social, and governance issues
In this case, ESG consulting firms and other players will have to provide sufficient proof supported by data that shows ESG investments have what it takes to impact the human race and environment positively. This is the only way the ESG players will cultivate and nurture strong relationships with investors.
Leverage Advanced Technologies
The world is changing, and firms can leverage advanced technologies to gain a competitive edge stand to be the biggest winners. Likewise, ESG players looking to gain a competitive edge and be at the forefront in attracting top dollars for ESG investing will have to do more in the new world of impact investing.
Firms capable of leveraging data processing technologies and artificial intelligence applications in investment strategies stand to reap big. With these technologies’ help, the players should articulate the importance of ESG investing to investors still on the fence.
Also, advanced technology will go a long way in helping promote better performance and risk management, something that investors are always on the lookout for. Furthermore, ESG consulting workforce will have to be empowered and trained to make fair use of the new tools needed for value creation and solving ESG issues.