In a recent episode of the InvestorDaily ESG Showcase podcast, Russell Investments senior portfolio manager James Harwood said the positive aspect of the once-in-a-generation tragedy caused by the COVID pandemic had been the rising awareness of global sustainability among investors.
“I think 2020 will be remembered for the chaos that ensued from COVID, but for me it was the year ESG came of age and became part of mainstream,” Mr Harwood said.
“We expect demand for ESG products from advisers and clients is only going to continue.”
Mr Harwood said while the focus of ESG investing in its early stages had been on environmental concerns, following a number of governance scandals with major Australian companies over the last 12 months, the “S” and “G” aspects were coming to the fore just as strongly.
“So far the main area of demand has been in the ‘E’, the environmental part of ESG – that has been the greatest focus for investors,” he said.
“The demand for ESG is going to broaden – ‘E’ is going to be the biggest focus but we do expect the social and governance aspects are going to become a greater focus for investors as well.”
Mr Harwood said the fund manager had seen strong inflows to their ethically focused products despite the dramatic volatility in markets over 2020, and that this was likely to continue with US President Joe Biden’s administration ushering in a new age of renewable investment.
“At a time of extreme volatility where most funds were seeing redemptions, the Low Carbon Global Shares Fund has ticked over the $1 billion mark, and we know this demand for decarbonisation strategies is going to increase under a Biden presidency,” he said.
On a local level, Mr Harwood said the key trends to note from investors were traditional blue-chip companies looking to branch out into renewables, following pressure from shareholders to do more around environmental sustainability.
“I think what we’ve seen the last two to three years is a trend for asset owners to influence company boards through engagement activities and that will increase over the years going forward,” he said.
“What I think is going to be most interesting for investors is how companies change their business models under Biden. We’ve seen recently Fortescue Metals talking about going into renewables in Tasmania, I think companies that can adapt like that are likely to do well.”
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