The need to address ESG issues and generate substantial returns at the same time is gaining prominence in the investment community. The new investment trend has also given rise to some of the fastest-growing fields, key among them being ESG consulting.
The ESG consulting industry is experiencing one of the biggest transformations as the need for accurate data and insights continues to gather steam. As more people look to align their investment ideas with green investing, the need for precise information and advice is becoming business in the consulting world.
ESG Consulting is on the cusp of becoming a multibillion business thanks to the proliferation of ESG funds eyeing opportunities around ESG investing.
Some of the real levers of change in ESG consulting include:
Young investors and Personal Beliefs
Millennial investors are increasingly shaping up the sustainable investing field thanks to their personal beliefs and goals. Unlike the old guard that was mostly focused on pursuing market returns, young investors are also looking to have an impact on society and the environment in addition to pursuing market returns.
“Millennial investors are likely to follow their conscience while investing. Majority of them are unlikely to budge on investing against their beliefs and values even if the returns were theoretically higher,” said, Ekaterina Chernova, The Altruist League’s Managing Partner
Therefore, ESG consulting firms have also had to shift their attention to young investors as they are the future of the investment world. The firms have also had to curate their services and products to align with the young investor's values, and beliefs as the race for capital inflows heats up.
While institutional investors are the driving force, as millennials accumulate more wealth, the status quo should change. Similarly, their values should lead them to sustainable investment, and something ESG consulting firms should pay close watch to.
Changing Global Focus
Changes in the global regulatory environment are also increasingly having a significant impact on the ESG consulting field. Many countries are increasingly enshrining ESG requirements and regulations with more than 500 measures already enacted to promote ESG issues.
The ever-changing regulatory framework forces ESG consulting firms to respond adequately to ensure their operations play by the set-out rules. Gaining compliance is also becoming an essential aspect if the firms stand the test of time and remain competitive in the burgeoning field.
Demand for ESG Data
The demand for ESG data is increasingly growing and is expected to change the ESG framework for many years to come. An influx of institutional investors into the burgeoning field continues to fuel demand for accurate ESG data needed to make informed investment decisions.
Similarly, ESG consulting firms have been forced to respond as they seek to stay competitive and attract more capital inflows. Most firms have started to leverage advanced technologies to provide quantitative analytics based on qualitative ESG data sets.
“In recent years, there has been a significant increase in ESG research and analytics capabilities. Better data and analytics are giving rise to more and better ESG investing,” said Milos Maricic, The Altruist League’s President.
ESG oriented investments are only expected to continue increasing as more investors acknowledge it is possible to generate market returns while also helping address ESG issues. The global sustainable investments have risen to above $30 trillion, a 60% plus rise since 2014.
The increase can be attributed to, among other things, a robust ESG consulting field. ESG consulting firms have enhanced ESG reporting making it easy for investors to access valuable insights, data, and advice needed to make informed decisions.
ESG consulting firms have also helped increase social, governmental, and consumer attention on the role that investments can play in addressing ESG issues. The firms also make it easy for investors and executives to realize how a strong ESG performance can help secure the environment and the human race while also supporting the corporation's long-term success.
By addressing why ESG is essential, ESG consulting firms might as well have shown why sustainable investing is the future of the investment world.
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