# Why the COVID-19 pandemic is pushing forward the ESG agenda
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2020-11-02
Category: INVESTING
Category URL: https://financedigest.com/category/investing
Meta Title: The Rise of ESG Investments in Financial Markets
Meta Description: Discover how ESG investments are reshaping the financial world after the pandemic. Learn how to align your portfolio with your values and grow your assets
URL: https://financedigest.com/why-the-covid-19-pandemic-is-pushing-forward-the-esg-agendahtml

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_By **Marc Beattie,** Chief Operating Officer at [AHR Private Wealth](https://ahrprivatewealth.com/), and Iain Ramsay, Chief Investment Officer at AHR Private Wealth_

The COVID-19 pandemic has caused significant upheaval for the financial markets. Firms that once represented good prospects have fallen foul as a result of the crisis, with managers and their clients taking decisions to ensure they are not exposed to the most ‘at risk’ areas of the market. However, this upheaval has also afforded investors the opportunity to reflect on their portfolios from a very different perspective, determining whether their investments correlate with their own social and ethical views.

**Before the storm**

Environmental, social and Governance (ESG) investments have been part of the [investment news agenda for some time now and even before the pandemic ESG investments](https://www.financedigest.com/making-esg-investing-more-inclusive.html "Making ESG Investing More Inclusive") were gaining momentum. In fact, £19bn was invested in UK ethical funds in 2019.

Driven by the extreme weather events across the globe and Greta Thunberg-inspired [climate protests, sustainability and climate change](https://www.financedigest.com/exclusive-hsbc-fund-arm-toughens-thermal-coal-policy-to-curb-climate-change.html "Exclusive-HSBC fund arm toughens thermal coal policy to curb climate change") has never been far from the top of the news agenda. This growing movement towards sustainability has been reflected in financial services, with more consumers wanting to save and invest in companies that have a [positive impact](https://www.financedigest.com/broadcast-switchers-market-increasing-adoption-of-ip-live-production-technology-to-positively-impact-growth.html "Broadcast Switchers Market: Increasing Adoption of IP Live Production Technology to Positively Impact Growth"), while avoiding those that do not meet their environmental, social or ethical standards.

In the investment world, this movement towards sustainability has pushed many companies in sectors ranging from [fossil fuels](https://www.financedigest.com/stellantis-ceo-calls-for-talks-to-soften-eus-2035-fossil-fuel-car-ban.html "Stellantis CEO calls for talks to soften EU’s 2035 fossil-fuel car ban") to tobacco to transition in a bid to change their public image. Companies such as Shell are prime examples of firms which have radically altered their visions and plans, partly as a result of pressure from institutional shareholders, adopting more planet-friendly policies or championing diversity in their [leadership teams](https://www.financedigest.com/zivver-expands-leadership-team-names-three-new-c-level-executives.html "Zivver Expands Leadership Team, Names Three New C-level Executives").

[Regulators were also supporting the ESG](https://www.financedigest.com/financial-think-tank-calls-for-regulated-esg-ratings-in-britain.html "Financial think-tank calls for regulated ESG ratings in Britain") agenda before COVID-19 struck. In January 2020, Dubai’s financial regulator published its guidance on sustainable finance, while [Hong Kong’s](https://www.financedigest.com/luxury-yacht-owned-by-sanctioned-russian-oligarch-docked-in-hong-kong.html "Luxury yacht owned by sanctioned Russian oligarch docked in Hong Kong") Securities and Futures Commission announced a Strategic Framework for Green Finance. The UK has also taken strides towards a more sustainable agenda, implementing [reforms last year that mean pension](https://www.financedigest.com/factbox-whats-next-for-frances-pension-reform.html "Factbox-What’s next for France’s pension reform?") funds now have an explicit responsibility to integrate sustainability in their investment approach.

**Full throttle**

It’s clear then, that the ESG agenda is already advancing at a [steady pace](https://www.financedigest.com/ecb-should-raise-rates-at-steady-pace-chief-economist-says.html "ECB should raise rates at steady pace, chief economist says"). [COVID-19 has only served to accelerate this trend](https://www.financedigest.com/predisposition-biomarkers-market-future-trends-segmentation-strategies-to-boost-growth-applications-with-covid-19-impact-till-2028.html "Predisposition Biomarkers Market Future Trends, Segmentation, Strategies to Boost Growth, Applications with Covid-19 Impact till 2028"). Not only have investors used the pandemic as an [opportunity to review their current investments](https://www.financedigest.com/unlocking-fresh-business-investment-opportunities-beyond-covid.html "Unlocking fresh business investment opportunities beyond COVID"), and update their portfolios in line with changing views around ESG, but they recognised the relative success of ESG investments against other stocks too.

From airlines and [commercial property](https://www.financedigest.com/rouzbeh-pirouz-on-investing-in-commercial-property-as-the-uk-emerges-from-the-pandemic.html "Rouzbeh Pirouz on Investing in commercial property as the UK emerges from the pandemic") to fossil fuels, these traditionally preferred stocks have all suffered badly as a result of COVID-19 induced lockdowns across the globe. Meanwhile, [ESG investments](https://www.financedigest.com/esg-investing-what-is-the-regulatory-position-in-2022.html "ESG investing – what is the regulatory position in 2022?") have had an opportunity to grow from fringe players to star performers.

Where before the pandemic ESG assets were seen as a ‘nice to have’ – a symbolic nod to sustainability more than an investment that could [deliver solid returns](https://www.financedigest.com/asset-management-firms-are-using-ai-to-deliver-higher-returns-for-investors.html "Asset management firms are using AI to deliver higher returns for investors") – that view has now changed. ESG investments are no longer being shelved in favour of other stocks deemed more likely to generate alpha.

In fact, the [strong performance](https://www.financedigest.com/strong-performance-of-investec-lowes-structured-product-maturities.html "Strong performance of Investec / Lowes structured product maturities") of many ethical investment classes since COVID-19 appeared has encouraged more investors to switch on to ESG options. According to Morningstar, money invested into ESG funds rose to $71.1bn between April and June 2020, pushing the total invested in these funds to over $1trillion globally.

**Remaining calm**

This [trend towards ESG looks only set](https://www.financedigest.com/top-10-fintech-trends-set-to-take-off-in-2022.html "Top 10 Fintech Trends Set To Take Off In 2022") to continue amongst investors beyond the pandemic, but consumers should remain open-minded about ESG investments and make sure they fully understand the funds they are investing in actually meet their requirements.

One of the most interesting trends we’ve observed at AHR [Private Wealth](https://www.financedigest.com/pragma-investments.html "Pragma Investments on Wealth Management versus Private Banking") has been that of investor access to ESG options. In the US, during the first quarter of 2020 80% of [inflows into ESG investments were via ETFs or index tracking Funds](https://www.financedigest.com/hedge-funds-set-to-end-2021-with-inflows-for-first-time-in-three-years.html "Hedge funds set to end 2021 with inflows for first time in three years"). Whilst the convenience and [low cost](https://www.financedigest.com/analysis-euros-20-year-low-leaves-ecb-facing-costly-choices.html "Analysis-Euro’s 20-year low leaves ECB facing costly choices") of such investments makes them an effective solution for investors looking to satisfy their ESG demands, it’s important investors are ensuring they’re still obtaining the best possible value from their investments and not just satisfying one criterion as a symbolic gesture. ESG, while important, should not be the sole [reason behind picking a particular stock or fund to invest](https://www.financedigest.com/7-reasons-why-you-should-invest-in-cryptocurrency.html "7 Reasons why you should invest in Cryptocurrency") in.

Given the increased coverage of ESG in the press, there’s also an increased risk of FOMO-induced losses, where [investment decisions are made on the back of a previous year’s](https://www.financedigest.com/halfway-through-2021-what-can-you-do-now-to-finish-the-2021-investment-year-strong.html "Halfway through 2021, what can you do now to finish the 2021 investment year strong?") high performance. But just because ESG [investments have performed well this year does not mean history is set](https://www.financedigest.com/italys-brembo-sets-up-venture-capital-arm-to-invest-in-tech-startups.html "Italy’s Brembo sets up venture capital arm to invest in tech startups") to repeat itself. A financial adviser well versed in sustainable investing can help investors cut through the jargon, complexities, and current trends of ESG and help them [build a portfolio](https://www.financedigest.com/building-a-portfolio-for-retirement.html "Building A Portfolio For Retirement") that really meets their criteria and their views.

[**Bright future**](https://www.financedigest.com/german-home-solar-power-firm-sees-bright-future-as-demand-soars.html "German home solar power firm sees bright future as demand soars")

Despite the current [economic uncertainty](https://www.financedigest.com/combatting-economic-uncertainty-in-2023-with-the-payments-sector.html "Combatting economic uncertainty in 2023 with the payments sector") caused by the pandemic, there is clearly a bright future ahead for ESG investing.  Even before the pandemic, grassroots movements started to influence companies to review how [close sustainability](https://www.financedigest.com/closing-the-sustainable-investment-gap.html "Closing the sustainable investment gap") was to the heart of their business while encouraging regulators to begin undertaking necessary change and extra scrutiny. [COVID-19 and the relative performance of ESG has only accelerated that shift towards more sustainable and ethical investing](https://www.financedigest.com/ngunu-tiny-discusses-how-covid-19-has-changed-the-future-of-impact-investment.html "N’Gunu Tiny discusses how COVID-19 has changed the future of impact investment").

From climate change to the gender pay gap, ESG is set to [stay firmly](https://www.financedigest.com/oil-prices-stay-firm-on-fuel-demand-despite-covid-19-surge.html "Oil prices stay firm on fuel demand despite COVID-19 surge") at the top of the agenda for investors and managers – it’s a shift that shows no sign of slowing. However, [consumers need](https://www.financedigest.com/money-orders-vs-checks-what-you-need-to-know-as-a-consumer.html "Money Orders vs Checks: What You Need to Know as a Consumer") to ensure that the investments they make really do meet their criteria. This isn’t about paying lip [service to a growing trend but finding options that genuinely meet the demands](https://www.financedigest.com/euro-zone-april-business-activity-grows-on-strong-services-demand-pmi.html "Euro zone April business activity grows on strong services demand – PMI") of investors, all while delivering returns. Ultimately, they will [need](https://www.financedigest.com/embedded-finance-is-the-new-norm-in-banking-but-what-is-needed-to-unleash-its-full-potential.html "Embedded finance is the new ‘norm’ in banking, but what is needed to unleash its full potential? ") a financial adviser that can help to provide them with the clarity and knowledge to ensures their portfolio continues to meet their ambitions, views and goals for the future.


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