The blue skies, wildlife sightings, and cleaner environmental indicators during 2020’s early lockdowns inspired startups, enterprises, and shareholders around the world. People saw a future filled with hope and possibility and wanted to put their investments in companies that shared priorities around maintaining and improving sustainability practices. As 2021 takes off, investing in environmental sustainability shows no signs of slowing down, further embedding in a marketplace that is ready for change and innovation.
Morningstar reports that in the first two quarters of 2020, $20.9 billion net flow into sustainable funds was close to the same as all the amount of investments for 2019. Morningstar’s list of sustainable funds’ ESG criteria, includes:
- Environmental – Carbon emissions, energy efficiency, water scarcity, waste management, pollution mitigation
- Social – Diversity and workplace policies, labor standards, supply chain management, product safety and usefulness, customer privacy, community impact
- Governance – Board structure, board composition, executive compensation, political contributions and lobbying, bribery and corruption policies and oversight, strategic sustainability oversight
Restoration and international cooperation play a large role in how shareholders will approach impact investing in 2021. Awareness has helped elevate issues around climate change; however, sustained action, investment, and collaboration is needed to address the ongoing climate challenges.
The Most Important ESG Issue
USSIF reported that ESG investing rose 42% from the start of 2018 to the start of 2020 — representing 33%, or one in three dollars, of the $51.4 trillion in total US assets under professional management. Environmental criteria grew faster than social or governance factors, increasing 57% (from $10.1 trillion to almost $16 trillion). Climate change remains the most important ESG issue considered by money managers in asset-weighted terms.
Corporate enterprises like Ford, Johnson & Johnson, Nike, Amazon, Starbucks, Alphabet, and Beyond Meat are all working to incorporate more eco-friendly policies. Other stocks and bonds for investing in environmental sustainability include Darling Ingredients (DAR), Waste Management (WMM), TPI Composites (TPIC), First Solar (FLSR), Nutrien (NTR), Xylem (XYL), Green Bonds, Too, IShares Global Green Bond, VanEck Vectors Green Bond (GRNB), and TIAA-CREF Green Bond (TGROX).
“Make your portfolio reflect your best vision for our future. Always be thinking ahead. Be optimistic,” said Co-founder of stock and investment company, The Motley Fool. “Think about the world that you want to create, because sure enough your dollars and mine, our capital, is helping shape the world.”
2021 is a wizened year, already shaped by the many lessons learned in 2020. Environmental sustainability will influence both enterprises’ and new startups’ governance and priorities. ESG practices are no longer just warm and fuzzy tag-lines, they are foundational principles for the next decade and beyond. And investors want more.
All opinions & expressions are solely those of the author and not those of any other individual, institution or business.