WHAT IS DRIVING THE ESG BOOM?

Key Global Challenges and Drivers

Global Challenges

A sustainable company is one that is managed in such a way that is positioned for long term financial success while accounting for all stakeholders’ interests. ESG data are the means that can enable an investor to quantify a company’s strategy, corporate purpose and management quality.

There are various reasons why ESG is increasingly becoming an imperative for companies across the globe. The world is changing, and companies need to change with it in order to deal with the resulting challenges and ensure sustainability.

Key Global Challenges Driving the Need for Change

ENVIRONMENTAL CHALLENGES

Industrialisation and extended use of fossil fuel have led to the global warming which could cost millions of lives by 2100
Negative externalities of human activities are costing the lives of millions of species

SOCIAL CHALLENGES

The development of our societies has left 700m+ people in extreme poverty
600m+ children still lack basic reading skills
Gender and racial discrimination still have strong roots in our societies

ECONOMIC CHALLENGES

Depletion of traditional energy sources is a global challenge to sustained growth
Address climate change while avoiding recession is an important challenge
Helping lagging economies to catch up is a top priority to ensure consistent growth

What is Driving the ESG Boom?

Interest in environmental, social and governance-oriented investing has soared lately. ESG investing grew to more than USD 30 trillion in 2018, according to the Global Sustainable Investment Alliance, and that number is set to keep rising as consumer tastes shift and investors demand more transparency.

According to recent analysis by EPFR, there is now a noticeable impact on some stock prices, and ESG-focused equity funds have taken in nearly USD 70bn of assets over the past year, while traditional equity funds have suffered almost $200bn of outflows over the same period.

Key Drivers Behind the Boom in ESG Investing

PUBLIC AWARENESS

Public opinions have been more and more aware and vocal about global challenges, led by independent groups of researchers and NGOs – resulting in growing pressure on corporations and governments

CORPORATE PRESSURE

With the rapid shift in mentalities and the growing pressure from consumers/public, an increasing number of corporations have stopped waiting for strict regulation to commit and strongly invest in ambitious sustainable goals

GOVERNMENT REGULATIONS

Governments are under increased pressure to take stronger actions and address targets fixed by the United Nations, resulting in stricter regulation upon corporations and
strong commitment to sustainable policies

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Contents

  • COVID-19 update – a few ESG considerations
  • ESG trends
  • Valuation benchmarks

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