ESG investing involves investing in companies that focus on environmental, social, and governance products and issues. This type of interest in nonfinancial factors has become popular in recent years. While there is still a rise in ESG investing, a few commonly held misconceptions may be holding back some people from considering ESG investing.
ESG Investing Does Not Provide Steady Growth
This is a common myth that’s easily proven false by looking at the numbers. In truth, ESG investing has generated consistent returns, more earnings growth, and higher dividends for investors. These benefits aren’t lost on investors. Up to 35% of investors reported that they invest in ESG stocks to improve their rates of growth. ESG investing in the top tier generates as much 2.89% in growth and 1.31% in returns.
More Investors Talk Than Those Who Really Invest in ESG
Another common myth about ESG investing is that there’s more talk about it than action. When looking at worldwide asset management, significant growth of ESG investments can be clearly identified. In 2015, there were ESG investments totaling $6 billion. Today, there is more than $150 billion invested in ESG stocks and funds. Shareholders are still increasing the focus on ESG issues, suggesting there’s going to be an even bigger interest in ESG investing in the coming years.
Millennials Are the Only Investors Interested in ESG
Another fallacy is that millennials are the only people interested in ESG investing. While that generation may have initiated the practice by looking to companies that addressed these issues, it didn’t take long for other investors to join the trend. Today, 85% of all investors are interested in ESG-related investments. When looking at individual generations, millennials still comprise the highest numbers of ESG investors. Almost 95% of millennials are interested in ESG investing. Yet, there’s a measurable interest in ESG investors across the board, regardless of age group.
While it was initially considered a passing trend, it does seem as though ESG investing has become a permanent facet of investing. The number of signatories with the UN Principles of Responsible Investment has been a 28% rise since the previous year’s records. This suggests a consistent growth in the number of investors and business entities that are interested in ESG practices.