Written by: George Prior
The backlash against ESG - the use of environmental, social, and governance factors in investing – could hit your wealth, warns the CEO and founder of one of the world’s largest independent financial advisory, asset management and fintech organizations.
The warning from Nigel Green of deVere Group comes as the IEA’s World Energy Outlook for 2023 published on Tuesday reveals that demand for oil, coal and natural gas is set to peak by 2030.
It also follows findings from a separate report published in the journal Nature Communications that damage from the global climate crisis has amounted to $391 million per day over the past two decades.
The deVere CEO says: “The International Energy Agency’s World Energy Outlook shows that there’s a major evolution taking place in how the planet is powered. From 2030, oil, coal and natural gas will play a significantly less dominant role.
“The unprecedented rise of clean energy technologies, including wind, solar, heat pumps and electric cars, will play a vital role.
“Yet despite this evidence that cleaner energy is the future - and, therefore ,should be uncontroversially appealing to investors – the anti-ESG movement is real and is growing.”
In a recent survey by The Conference Board of more than 100 large US companies, almost half said they have already “experienced ESG backlash”, and 61% anticipate it to continue or intensify over the next two years.
“Much of this has been focused on the financial industry, and large asset managers in particular, which means that your investments could be being repositioned away from ESG. This, we believe, could have a longer-term, detrimental impact on your wealth.”
Nigel Green continues: “Anti-ESG proponents, including some financial advisors, often argue that ESG investing is just a trend that will eventually fizzle out. However, the data suggests otherwise.
“The growing emphasis on ESG factors is not just a fleeting fashion, but rather a reflection of changing market dynamics and consumer preferences. Ignoring these shifts would put a company’s stock performance at risk – and therefore, potentially, your investments.”
“Anti-ESG proponents may encourage you to miss out on profitable investment opportunities. Numerous studies have shown that companies with strong ESG performance often outperform their peers. Ignoring this data may lead to missed opportunities for portfolio growth,” he notes.
One of the primary drivers of ESG investing is risk mitigation. “Companies that perform well in ESG criteria tend to be better prepared to navigate a range of challenges, from environmental disasters to social controversies. Again, if you overlook these considerations, you may find your investment portfolio vulnerable to unforeseen risks that can lead to financial losses.”
An undeniable fact is that governments and regulatory bodies are increasingly recognising the importance of ESG factors. Ignoring ESG criteria can expose companies – and therefore their investors - to regulatory risks, including fines and legal liabilities associated with non-compliance with evolving ESG regulations.
Nigel Green concludes: “The anti-ESG movement – which is alive and well and becoming increasingly powerful - fails to see the bigger, longer-term picture.
“Our concern is that people will be coerced into this narrow, backward-looking view and miss out on major opportunities that could negatively affect their prospects for growing and safeguarding their wealth.”
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