ESG and early stage investing
- On February 11, 2021
- By GrowthInvest Marketing
ESG investing is obviously the talk of the town. ESG inflows are incredible and growing at about 17% per annum. Globally standing at about 50 trillion USD of assets, a recent Deutsche bank report forecasted 150 trillion USD of assets by mind 2030s.
Put simply companies that take ESG seriously can mitigate risk substantially for investors. At the public company level if a company gets a very high ESG rating from a ratings agency in general it will communicate that company has a strong awareness of risks across environmental issues, social issues and governance. A great example of this would be the recent collapse of Wirecard bank in Germany. Due to continued governance issues Wirecards’ ESG rating had plummeted. At its last ratings review it scored only 4 out of 100 on governance – effectively rendering the business untouchable from an ESG point of view. Months later it was bankrupt.
At a deeper level ESG is about much more than risk. Companies that have sustainability and environmental and social values at their core are likely to thrive in the new climate change/ pandemic world we are now entering. The days of robbing Peter to pay Paul in terms of planetary and human health are now truly coming to an end. FMCG companies that are pushing product lines that drive poor health run the risk of being consigned to a high-risk investment with poor ESG scores. The cost of capital increases and business performance suffers.
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