ESG investing has historically been a niche investment strategy. Advertised often as a specialty product rather than a service, it’s no surprise that some see ESG as a fad or trend with very little long-term future. Instead, what we are seeing is a shift in the investment landscape. The link between sustainability and financial services is far more connected than ever. According to PwC
, that boundary between traditional and sustainable investments will all but disappear by 2022.
This shift is the result of many factors including: Demand for greater personalization and customization in the market, advances in cost structures and technology, increasing regulatory momentum and pressure ESG’s demonstrated outperformance in the market, and escalating environmental, social, and health crises creating pressure for needed change.
As we navigate this post-fund future with the rise of direct indexing
, this moves financial services towards greater customization and flexibility — resulting in the integration of ESG as a feature of your offering instead of a niche or specialty product.
The US SIF’s 2020 Trend Report
outlines how we’ve seen a 42% increase since 2018 in investors considering ESG factors. That’s $17.1 trillion at the start of 2020 compared to $12.0 trillion at the beginning of 2018. Today, close to one in three dollars of US-domiciled assets under management are using sustainable investing strategies. That number is only going to continue to grow.