Envestnet witnessed record adoption of impact investing in 2020. Assets in the 431 environmental, social, and governance (ESG) and impact investment strategies on the Envestnet Impact Platform grew 81 percent last year, reaching $22 billion in AUA/M. Amidst a global pandemic, economic hardship, and calls for social justice, this approach to investing has gained striking momentum and is inspiring investors to put their money to work in meaningful ways.

As we expect this trend to continue, we’ve identified five ESG themes to keep an eye on this year, and we asked five thought leaders with experience in this space to give us their take on one theme. These insights may be valuable in conversations with your clients who are interested in aligning their portfolios with environmental and social outcomes.

ESG Trends to Watch

1. ESG Gets More Sophisticated

Robert Eccles of Saïd Business School at the University of Oxford discusses the ideology and reality of sustainable investing. While some still conflate it with values-based negative screening, this is not the way investors are approaching sustainable investing today. Sustainability is now at the core of delivering strong, risk-adjusted returns, and it’s reality, not an ideology. Read more from Robert on Envestnet | PMC.

2. The Rise Of The Hyper-Personalized Portfolio

Josh Levin, Co-Founder of OpenInvest, shares his insights on the post-fund future and the opportunity for the genuine personalization of client portfolios. Technology has not only made this possible but also relatively easy. We’re evolving beyond funds, which, just like compact discs (CDs), are barriers to consumption, not the source of value. And with that, we must embrace Spotify and understand that investors want portfolios that reflect their specific goals and values. Advisors can become the DJs for their clients. Read more from Josh on Envestnet | PMC.

3. Consensus Is Building Toward Common Standards

Janine Guillot, CEO of the Sustainability Accounting Standards Board (SASB), writes about the need for consistent, comparable, and reliable ESG information and the industry’s efforts to coalesce and work together to simplify this field. The SASB is an independent nonprofit organization that sets standards to guide the disclosure of financially material sustainability information by companies to their investors. Advisors will likely benefit from consensus building and the standardization of ESG information. Read more from Janine on Envestnet | PMC.

4. The Era Of Stakeholder Capitalism And Shareholder Activism

Martin Whittaker, CEO of JUST Capital, discusses how stakeholder capitalism will enable companies to rethink value creation and position for the future, a future in which we have an economy that more people feel included in and supportive of. These other stakeholders – workers, communities, and the environment – should be viewed as drivers of value and not expendable resources passed onto society. Investors, companies, governments, and broader society are waking up to this reality. Read more from Martin on Envestnet | PMC.

5. Making Progress On The Path To Net Zero

Larry Fink, Chairman and CEO of BlackRock, wrote in his annual letter to CEOs in 2019 that climate risk is investment risk. This year, he writes about how the fundamental reallocation of capital resulting from pricing in climate risk has accelerated, in part due to democratizing access to climate-aware portfolios through indexing. The transition to a net-zero carbon economy will be crucial in delivering on essential reductions in greenhouse gas emissions to combat climate change. And this has implications for portfolios. Read more from Larry on Envestnet | PMC.

Hear more about the recent developments on each of these trends here, and for more information and insights related to impact investing, please visit Envestnet | PMC.

The information, analysis and opinions expressed herein are for informational purposes only and do not necessarily reflect the views of Envestnet. These views reflect the judgment of the author as of the date of writing and are subject to change at any time without notice. Nothing contained in this piece is intended to constitute legal, tax, accounting, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type.

Written by Kiley Miller

Kiley serves as an Associate Portfolio Manager at Envestnet I PMC. She is a member of the Enterprise Portfolio Solutions team and is responsible for asset allocation, manager selection, research due diligence, and portfolio administration for PMC’s impact portfolios, designed for investors with environmental and social impact interests or priorities.

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