Why ESG is the future of Investing 

You might have heard the term “ESG” mentioned a lot but prepare to hear it 100x more. The world is going green, many governments have committed to green policies with deadlines. In the UK, petrol and diesel cars will no longer be for sale after 2030 and the Net Zero strategy says we will cut our CO2 emissions by 60% by 2050. G7 countries have a ‘Build Back Better for the World’ plan. Essentially governments are saying, we are moving towards a greener policy whether it’s energy, waste, consumption, CO2 output or all of these combined. That means all businesses big or small, need to figure out how all of these policies will impact them. For some it will be harder than others, I wouldn’t want to be a manufacturer trying to meet the CO2 target, for others, it means ESG measures.

ESG is:

• Environmental, Social Governance (ESG) goals/measures businesses set themselves to show us what they’re doing to help

Investors and financial institutions are pushing for ESG standards, they recognise it is part of our future and we have to prepare for it now. Blackrock’s CEO Larry Fink announced it plans to publish ESG metric’s for 100% of the firm's portfolio.

ESG in itself is big business (4 trillionish to date):

• 91% of investors now say non-financial metrics such as ESG metrics now play a big part in their decisions (no surprises why the banks/funds and PE firms are interested)

• 70% of job seekers would prefer to work for a sustainable company

• 54% of consumers would pay more for ethical and sustainable goods

It’s not just about money & data. The social aspect of ESG also includes things like gender equality measures businesses should set themselves as well as health and wellbeing of employees. ESG data and compliance in theory should make capitalism a little more transparent. We should be able to see more, if not all, businesses’ ESG metrics over the next few years. This won’t just be earnings but all metrics in relation to the business for:

• Environmental: CO2 output, water consumption, energy use

• Social: Employee satisfaction, supplier diversity, customer satisfaction

• Governance: Board diversity, executive compensation, ethical practices

Elon hates ESG data, because Tesla didn’t make the top ESG companies list:

But if we had a £1 everytime Elon didn’t take Tesla criticism well, we would all be rich. ESG data (even if sometimes questionable since data is easily fudged) is here to stay and hopefully will provide us nosey people more insight on what is really going on inside these companies.

British ESG startups to keep an 👀 on:

Sunlight.io is building an edge-to-cloud hyper converged platform

Tumelo is a financial technology firm building the tech for fund managers

Clim8 Invest is a sustainable investing platform

Olio is an app that reduces waste by allowing people to share/collect free stuff