The world is becoming more socially and environmentally conscious. The people are willing to make some changes in the way they live, travel and invest, to reduce the damage they cause to the environment or society. This shift was observed profoundly in 2007 when the European Investment Bank issued its first green bond, a EUR 600 million equity index-linked security, whose proceeds were used to fund renewable energy and energy efficiency projects. Since then, over $155 billion worth of public and corporate green bonds have been issued.
The success of these bonds has made it very clear that investors are increasingly conscious of the social and environmental consequences of the decisions that governments and companies make. The investors are aware of the activities and are quick to punish companies that indulge in unethical practices such as for child labour, human rights violation, harm to the environment, poor governance, and a lack of gender equality.
According to Harvard Business Review, this has caused the investments in socially conscious projects to quadruple since 2010. Environmental, Social, and Governance (ESG) criteria are getting integrated into investment decisions. In 2018, $11.6 trillion of all professionally managed assets were under ESG investment strategies, compared to $3 trillion overall in 2010.
This change has caused many companies to integrate ESG criteria in their business model. Sustainability is not only talked about but is implemented in order to have a competitive advantage. Climate change and carbon footprints are considered thoroughly in every plan of action. Because it is not only the profits that these investors are looking for.
The investors also want to know that the money they invested is not causing harm to the society or the environment and is in fact used for its welfare. They want to be more responsible towards society and contribute towards nurturing the planet instead of destroying it.
