The history of ESG investing shows why the concept of ‘sustainability’ has always belonged to the people.

Environmental, Social and Governance (ESG) Investing is appearing in the mainstream media with increasing frequency. This is partly the consequence of the evidence showing how severe the impact of climate change and environmental destruction will be on the world. One recent study concluded that the net cost of CO2 emissions in economic terms is approximately $417 per tonne worldwide – with a greater share of the costs born by emerging economies such as India ($90 per tonne) than the biggest polluters such as the US ($10 per tonne)[1]. This shows the importance of sustainability to ensure a positive ecological and economic future.

 

It is often assumed that sustainability is a modern concept. Yet its principles have been evolving since ancient civilisations first understood the delicate balance between man and nature. And economic giants such as Adam Smith extensively discussed what we now call ESG issues in his work. The picture that emerges from a study of history and from more recent research is the need to integrate ESG criteria within investing from the outset, and to see it as an opportunity (one worth $125-140trn per year on some estimates). If done successfully, this can have a positive impact on one’s own portfolio, as well as on society and financial markets.

 

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Footnotes:
1.

Source: Ricke, Drouetet al. “Country-level social cost of carbon” October 2018, Nature Climate Change, https://doi.org/10.1038/s41558-018-0282-y

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