The environment, social and governance sector (ESG) refers to ESG services to small and big companies which aim to contribute to sustainable development.

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Trends and opportunities

The largest banks in the world have significantly improved their capital position in the years since the crisis. While there is lingering debate in some corners that banks are still not sufficiently capitalized, it is undeniable that the Even though ESG themes are long-term, but some can emerge with sudden force. Following are five trends from 2020 that are likely to steer ESG investing in to the new decade.

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1. Climate change innovators: In order to solve the climate crisis, that is currently the highlighting issue today worldwide, innovative technology, scalable deployment and accurate knowledge about the issue is vital. Where there are many startups trying to come up with solutions to this global problem, on the other hand, according to alternative data, there are many big cooperation’s who are already investing their time in assembling different various climate solutions. In 2020, investors are using this alternative data to find these companies who are working towards a safer and carbon free world.
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2. New terms for capital: Investors, including banks, are now investing money in projects and businesses that are related to green energy. Unlike companies who only used the label of corporate social responsibility to portray a good image in the market, in 2020 people at the top of the hierarchy are giving it more importance, realizing the benefits it comes with.
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3. Re-valuing real estate: Just as real estate investors and managers begin to grapple with what climate change might do to their assets physically, now they may also have to contend with accelerating regulation. Location matters in real estate, and vast portions of the global property stock are in cities and regions marching toward zero-carbon building standards. In 2020, showing the concern for climate change and giving solutions to it in the property portfolio, will surely lead towards a better reputation of the business.
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4. The new human capital paradox: With the advancements in technology today, there is a dire need of updating human skills at work too. As competitors are shifting to a more digital and automated mode of work, companies need to transform their workforce, including the HR and management, like wise. In 2020, many more companies will have to become human capital multi-taskers, laying off some workers while simultaneously recruiting scarce new kinds of talent that may seem alien to management. Like a high-wire juggling act, any lapse could prove disastrous.
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5. Keeping score on stakeholder capitalism: Mission statements have done little to shift the enduring power dynamic between companies, shareholders and other stakeholders. Until now, only shareholders have had clear channels for holding companies to account. Bit by bit, other stakeholders are trying to influence the conversation. In 2020, stakeholders without proxy cards will evolve their activism, joining forces with willing shareholders and using increasingly sophisticated means to size up whether companies really “walk the talk” when it comes to their stakeholder commitments.

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Market size

ESG investing has grown throughout the years and is expected to reach to $50 trillion over the next two decades. The market is already big, and it’s only growing, giving credit to the upheavals of 2020. Be it the global pandemic, the movement for racial justice or the threat of climate change, all of this has led to an increase in the environment, social and governance sector, leading to an increase in such investments, making ESG related topics quite central to the investment conversations. ESG assets are growing and connections between ESG and risk is strengthening.

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