Has the G7 Confirmed ESG is the Only Game in Town for Investors?

The leaders of the G7 seemed to cover a lot of ground at this week’s conference in Cornwall, but the underlying message throughout was climate change… and the need for countries to innovate and act now!

One of the big calls was a promise to move away from coal-fired power stations, unless they had the ability to capture carbon emissions – part of the world leaders’ commitment to keeping the projected global temperature rise to 1.5 degrees Celsius.

The move away from coal will be just one of a range or urgent measures to be undertaken in order to meet this commitment. The Cornwall conference also saw the leaders of the world’s largest economies set out plans to reduce emissions from transport, farming, and the production of construction materials such as steel and cement.

In reality, the call to achieve net zero emissions by 2050 and indeed a halving of current emissions by 2030, will require a plethora of new innovation centred around ESG investment – which is great news for investors.

And this is backed up by recent studies indicating that for funding institutions, a climate-friendly investment strategy is now not just about being a good corporate citizen but is absolutely key to successful fundraising.

Climate change and sustainability have fast become the trend for the fundraising market, followed closely by health and biotech.

Venture Capitalists and Private Equity firms firmly believe that leaning towards ESG (environmental, social and governance) investments will not only make them look good in the eyes of the public but will also greatly improve their long-term returns.

ESG criteria are fairly self-explanatory. Environmental refers to how a company performs in terms of its “green” commitments. Social criteria cover how a company might manage its relationships with employees, suppliers, customers, and local communities, while governance deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights.

And with the leaders of the world making such strong promises, investors can rest assured that there will be plenty of subsidies and government money going into the ESG sector in the coming years, which should provide comfort as they continue to invest into the space.

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