Expats around the world are increasingly making a beeline for investments with strong Environmental, Social, and Governance (ESG) credentials – and this may prove to be the most sensible strategy for the long-term. It’s a massive trend. Global ESG assets are set to exceed $53 trillion by 2025, according to Bloomberg Intelligence, representing more than a third of the $140.5 trillion in projected total assets under management. We told you it’s huge!
So, what is ESG?
E is for the environment and includes issues such as climate change policies, carbon footprint, water usage and use of renewable energies. S is for social and includes workers’ rights and protections, client satisfaction and workplace health and safety. G is for governance and includes diversity of the board, corporate transparency, compensation practices and internal control processes.
Why should you consider ESG investments?
Previously, these impactful, sustainable funds were just perceived by investors as a quirky or charitable thing to have. But now many experts say that they should be a part of everyone’s portfolio. Or, as US News, puts it: “ESG investing is no longer reserved for the side dishes to your portfolio; it’s become so popular, you can now make an entire portfolio meal of it!”
Why is this?
- They can be a diversification tool – which is how investors can jump on opportunities and mitigate risks in the markets.
- ESG investments have outperformed their benchmarks over recent years. “From a risk management point of view, including these companies in your portfolio is, clearly, a sensible decision to take,” says deVere CEO and founder, Nigel Green.
- A major shift has taken place in corporate attitudes. How companies approach ESG issues, and the value they place on them compared to other considerations, has already changed. The ESG themes are already embedded in the global economy as this is only set to grow in the years to come.
- The pandemic has highlighted once again how we have a moral obligation to back and fund entities that support the wellbeing of the planet and our communities – if we don’t, we’re on a footing for serious, negative consequences. The case for expats wherever they choose to live in the world having exposure to ESG in their portfolios seems unquestionably sound. The deVere CEO opines: “We believe that a failure not to seek profits with purpose could negatively impact your long-term accumulation of wealth.”