Sustainable investing: the outlook for 2022

What would you like to know

  • Sustainable investing is integral to achieving a net zero world.
  • The SEC could promulgate new disclosure rules by asset managers and public companies in 2022.
  • In addition, global sustainability standards could be developed.

Sustainable investing, which set new records for global and US asset flows in the third quarter of this year, is expected to accelerate in 2022 and beyond as demand from institutional and retail investors increases as well. than the offerings of global asset managers.

“Investing with a sustainability lens is fundamental today,” Kunal Kapoor said in his speech at the start of Morningstar’s annual conference in September.

Climate change and the risks it poses to the global economy, financial markets and individual businesses are underpinning what many hope will be a transition to a net zero world where carbon emissions equal quantity of carbon removed from the atmosphere.

During the third quarter, global sustainable funds accumulated nearly $ 4 trillion in assets, including more than $ 330 million in U.S. sustainable mutual funds and ETFs, almost double the level previously. is one year old, according to Morningstar.

Net flows to U.S. sustainability funds reached $ 56 billion during the period, with the launch of 74 new sustainability funds, three-quarters of which are equity funds.

“The net zero transition is not just about reducing carbon emissions; This is a transformation of the business model similar to the industrial revolution, ”wrote Michael Jantzi, founder of Sustainalytics, a Morningstar subsidiary which provides environmental, social and governance (ESG) analytical research, ratings and data to institutional investors and companies, in a recent report.

“Addressing this is part of the fiduciary duty… Investors embrace ESG (environmental, social and governance factors) as part of the transition to a net zero world.

Addressing climate change, other issues

Their investments inspire companies to tackle not only climate issues, but also issues that impact workers, customers, communities and the cline, according to Jon Hale, Morningstar’s global sustainability manager. He expects the influence of sustainability considerations on financial reporting, oversight, risk and regulatory frameworks to increase.

Indeed, the SEC is considering stricter disclosure requirements on environmental, social and governance (ESG) matters by asset managers and public companies, which could be adopted next year, and has already increased its disclosure requirements. reviews of both.

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