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Our newsletter, to be delivered twice monthly, will explore pertinent issues related to smart technology, clean energy and sustainable agriculture. Our goal is to keep a finger on the pulse of industry trends and how they relate to Novus’s goals and success.
What exactly is ESG investing?
As a firm committed to sustainability, Novus is focused on vetting potential partners for scalability and profitability as well as environmental, social and corporate governance (ESG) practices. In other words, we take into account both a company’s performance and its values during the assessment process.
ESG index funds have seen a surge of investor interest in recent years. According to a Morningstar Report, there were 534 sustainability-driven index funds totaling $250 billion in 2020, with the U.S. market representing about 20% of that.
Part of the appeal is driven by an increasing consumer interest in corporate responsibility. But there’s also a component of practicality — having a clear view of a company’s operations and ethics can help investors sidestep messy PR disasters.
And when the coronavirus pandemic struck, these funds saw a significant bump as investors started to contemplate the role their assets played in the bigger picture.
Analysts expect this investment philosophy to gain a substantial share of the market. According to the Deloitte Center for Financial Services, ESG-mandated assets could grow as much as three times faster than non-ESG-mandated assets, comprising half of all professionally managed investments by 2025.
A closer look at ESG criteria
A company’s ESG report outlines non-financial factors reflective of the company’s ethics and values. Here’s a breakdown of what might be included:
Environmental criteria
- Energy and water use
- Waste management and recycling
- Pollution abatement
- Product life-cycle impact
- Conservation of natural resources
- Animal welfare
Social criteria
- Workplace safety
- Healthcare provisions
- Pay equity
- Product safety
- Community outreach
Governance criteria
- Board diversity
- Executive pay
- Lobbying practices
- Business ethics
Investors examine ESG reports — along with traditional metrics like the company’s profits, losses and financial strategy — to decide whether to invest. However, this can be tricky.
Currently, there isn’t a consistent framework for drafting an ESG report, which puts onus on investors to ensure the company’s policies truly are in line with their own values. However, this could change within the next year or two.
And while ESG can cover a broad range of criteria, five key trends will be especially prevalent in the immediate future. These include:
- Climate change
- Water management
- Conservation of biodiversity
- Human rights
- Governance policies
In Other News
Flying High
Could the airline industry one day capture carbon dioxide emissions to power its planes? Scientists think there might be a way to make it happen.
Long-term goals toward protecting biodiversity
The U.N.’s Convention on Biological Diversity’s post-2020 Global Biodiversity framework outlines a vision to protect at least 30% of the planet’s land surface by 2030, which in turn will reduce threats to biodiversity while ensuring human needs are met.
Slowing the Flow
Agricultural irrigation makes up 70% of global water usage, but a slew of new tech innovations could play a big role in water conservation efforts.
A Different View
An artist has created a series of paintings called “Tragic Beauty.” Inspired by melting glaciers, the artist used an encaustic painting technique involving melted beeswax. The paintings are a haunting reminder of what’s at stake if the climate crisis continues unchecked.
What's the Buzz?
An Irish startup called ApisProtect recently announced a product line that uses sensors to monitor honeybee colonies while minimizing the number of hive checks beekeepers have to perform. This means less stress for the bees and fewer disturbances to the hive’s atmospheric conditions.
