According to JPMorgan, in 2011, just 20% of S&P 500 index companies reported on sustainability. Today, that figure is 85%. Nearly 80% of directors now report that their boards are focused on aspects of ESG.
Far from constraining growth, ESG assets are expected to be worth $50 trillion by 2025 — more than a third of the global $140 trillion assets under management, according to an estimate by Bloomberg Intelligence.
Despite coming with some self-imposed restrictions — though in the US, EU, and internationally, ESG disclosures are being adopted at a government level — ESG is increasingly being seen as a sign of strength and resilience in companies. By adopting ESG principles, companies strengthen their own foundations. Investors know this.
Though guidelines surrounding ESG disclosures are being developed, a significant part of the benefit of ESG in business is in building intangible assets: relationships, goodwill, reputation, human capital, a loyal customer base, intellectual property, and more. In 1975, intangible value made up 17% of total company value. In 2020, that figure was 90%.
As consumers, regulatory bodies, and governments increase pressure on businesses to demonstrate their commitment to responsible business practices, it’s critical that companies effectively, profitably, and efficiently integrate ESG into their broader strategies.
Knowing that a company is doing a social good will fire up its employees to work harder. Environmental considerations sustain the system that gave rise to the company in the first place, and ensuring strong and transparent governance strengthens a company in the long run.
For investors, integrating ESG considerations into decision-making is a natural extension of what they have always sought to do: consider the future, factor in potential risks and opportunities around companies’ financial growth trajectories, assess valuation, and invest accordingly, based on the sustainability of those business models.
This is why ESG investing is growing so rapidly. Not only is it good for people and the planet — it’s good for investors and their bottom lines, too.