23 Finance Monthly. Inve s tmen t rebukes over their lack of climate change action. Investors are taking note and are increasingly willing to force companies to reduce their carbon dioxide emissions quickly. Interestingly, the pandemic has shone a spotlight on social issues, pushing many investors to reconsider the management of social risks within their portfolios. This elevation of the ‘S’ in ESG is likely to continue. At the same time, the Black Lives Matter movement is bringing into sharper focus the lack of meaningful progress on racial equality and progressive investors are considering what action they can take. Diversity will continue to matter. Take, for example, the growth and traction of gender-lens investing – an approach that integrates genderbased factors into investment strategy, process and analysis, in order to deliver positive benefits to women and girls. It is a growing sector and attention is not only coming from sustainable and impact investors. The evidence is stacking up as research continues to demonstrate the compelling case for gender diversity in the workforce, for overall economic growth, as well as improvements in innovation and productivity. Still some challenges to overcome There are still challenges to overcome to embed sustainable investing as the ‘new norm’. Disclosure and ESG data remain thorny issues, with concern that data is still fragmented, disclosure is inconsistent, and the lack of standardisation holds investors back. We still have some way to go on the regulatory front too – while the EU has been a front runner with its sustainable finance agenda, there are some delays as well as ongoing heated debates. There is also increasing concern over the issue of greenwashing which is leading investors down the wrong path in some instances. Particularly for retail investors, where many are relying on certain labels such as ‘green’ or ‘SDGs’ or ‘gender diversity’ to guide them in the right direction when they make an investment decision. The problem is that sometimes these labels are not properly assigned, or maybe stretching the trust. This gives the investor a false sense of comfort, not tomention the damage it does to the reputation of the sustainable investment industry. The important thing is to be aware of ‘greenwashing’ - some companies and funds can do a good job at ‘greenwashing’. Corporate marketing and PR efforts can hide a whole host of sins and this makes the job of sustainable investors even harder. It requires sustainable investors to do their research, check against third-party sources and undertake thorough due diligence. Reasons for optimism Despite these challenges, we have many reasons for optimism and 2022 is likely to see a sustainable investing boom. Perhaps one of the most exciting developments is how retail investors are waking up to the sustainable investing trend. Interestingly, research tells us that a lot of this drive is coming from women as well as younger generations. For certain, new audiences and new conversations are to be had – and the finance industry needs to be ready to deliver. About the Author Jessica Robinson is a leading expert on sustainable finance and responsible investing, and author of Financial Feminism: A Woman’s Guide to Investing for a Sustainable Future. Find out more at moxiefuture.com
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