Why ESG Matters (Third of a Series)

Besides historic influences, climate change, diversity, equity and inclusion, and corporate accountability are now the lenses through which investors are assessing managers’ ability to understand the associated risks and opportunities for every investment decision.

Despite the politics of climate change, the burden of scientific evidence and “rapid degradation of biodiversity and rise in extreme weather events” (as one report notes) have compelled global policy makers to largely unite their efforts around decarbonization.

One of the most significant is the Net Zero Asset Managers initiative. It comprises 236 signatories representing $57.5 trillion in AUM who are also aligned with the 2015 Paris Accords. Across countries, municipal, state and regional governments and major companies, net zero targets now represent at least 68% of global GDP purchasing power parity (PPP) and 61% of global greenhouse gas (GHG) emissions.

Achieving these goals will require a galactic shift in how nations employ energy resources. From a world where more than 50% of consumption is either coal or oil (see our Chart of the Week) to one powered by wind, water, solar, and other renewables, will require careful planning for the consequences.