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A Global Perspective: The Possibilities in International Equity Investing

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In 2021, investors continue to embrace environmental, social, and governance (ESG) investments at record levels.

In the first quarter of 2021, global ESG fund inflows outpaced the last four consecutive quarters, reaching $2 trillion. But while ESG gains rapid momentum, the CFA Institute shows that 33% of professional investors surveyed feel they have insufficient knowledge for considering ESG issues.

To help investors understand this growing trend, this infographic from MSCI helps provide a fact check on five common ESG myths.

1. “ESG Comes at the Expense of Investment Performance”

Fact Check: Not necessarily

Worldwide, ESG-focused companies have not only seen higher returns, but stronger earnings growth and dividends.

Returns by ESG Ratings Earnings Growth* Active Return** Dividends and Buybacks
Top tier 2.89% 1.31% 0.28%
Middle tier 1.35% 0.12% -0.02%
Bottom tier -9.22% -1.25% -0.05%

Source: MSCI ESG Research LLC (Dec, 2020)
*Contribution of earnings growth and dividends/buybacks to active return
**Active return is the additional gain or loss compared to it respective benchmark

In fact, a separate study from the CFA Institute shows that 35% of investment professionals invest in ESG to improve their financial returns.

2. “Investors Talk About ESG But Don’t Invest In It”

Fact Check: False

Global ESG assets under management (AUM) in ETFs have grown from $6 billion in 2015 to $150 billion in 2020. In just five years, ESG AUM have accelerated 25 times.

Today, money managers are focusing on the following top five issues:

Top ESG Issues Assets Affected Growth in Assets Affected (2018-2020)
Climate change / carbon emissions $4.18T 39%
Anti-corruption $2.44T 10%
Board issues $2.39T 66%
Sustainable natural resources / agriculture $2.38T 81%
Executive pay $2.22T 122%

Source: US SIF Foundation (Nov, 2020)

Meanwhile, over 1,500 shareholder resolutions focused on ESG-related matters were filed between 2018-2020. Not only are investors turning to ESG assets, but they are placing higher demands on corporate responsibility.

3. “ESG Investment Strategies Eliminate Entire Sectors”

Fact Check: Not necessarily

First, not all ESG investment approaches are exclusionary.

For instance, in North America roughly 51% of ESG ETFs used an ESG integration approach as of Dec. 31, 2020. In an ESG integration approach, ESG risks and opportunities are analyzed with the goal to support long-term returns.

By comparison, values and screens approaches, which accounted for over 22% of ESG ETFs in North America may screen out specific business activities, such as alcohol or tobacco, or sectors such as oil & gas.

Percentage of ESG Type Integration Values & Screens Thematic Impact
North America 50.9% 22.5% 20.7% 5.9%
Asia 57.8% 34.6% 3.8% 3.8%
Europe 30.8% 60.6% 8.6% 0.0%
Australia 28.6% 71.4% 0.0% 0.0%

Source: Refinitiv/Lipper and MSCI ESG Research LLC as of Dec 31, 2020 (MSCI Feb, 2021)

Second, companies are assessed on a sector-specific basis where ESG leaders and laggards are identified within each sector in comparison to peers. In other words, ESG doesn’t mean eliminating exposure to entire sectors. Instead, investors can choose from a range of companies based on their ESG ratings quality.

4. “ESG Investing Is Only For Millennials”

Fact Check: False

Although ESG is popular among millennials, ESG investing is being driven by the entire investor population. In 2019, one study finds that 85% of the general population expressed interest in ESG investing.

Interest in Sustainable Investing General Population Millennials
2019 85% 95%
2015 71% 84%

Source: US SIF Foundation (Nov, 2020)

Sustainable investing goes far beyond millennials—ESG disclosures are quickly becoming requirements for key industry participants, such as institutional investors and listed companies.

5. “ESG Investing is Here to Stay”

Fact Check: True

Climbing 28% in 2020 alone, over 3,000 signatories have committed to the UN Principles of Responsible Investment. As of the first quarter of 2021, 313 global organizations and 33 asset owners have been newly added.

Growth of UN PRI Number of Signatories* AUM Represented
2020 3,038 $103.4T
2019 2,370 $86.3T

Source: UN PRI
*As of Mar, 2020

Central to ESG’s growth is the availability of ESG investments. ESG investing has become more widely accessible—which wasn’t always the case. Over the last decade, the global number of ESG ETFs has grown from 46 to 497.

Why the Facts Matter

As ESG investments continue to play an even greater role in investor portfolios, it’s important to focus on data rather than prevailing ESG myths that are not backed by fact.

Given the recent momentum in investment returns and ESG adoption, data-driven evidence empowers investors to build more sustainable portfolios that better align with their investment objectives.

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Source: https://www.visualcapitalist.com/a-global-perspective-the-possibilities-in-international-equity-investing/

Visual Capitalist

The Biggest Business Risks in 2021

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View the high-resolution of the infographic by clicking here.

Since the COVID-19 crash, global equity markets have seen a strong recovery. The 100 biggest companies in the world were worth a record-breaking $31.7 trillion as of March 31 2021, up 48% year-over-year. As a point of comparison, the combined GDP of the U.S. and China was $35.7 trillion in 2020.

In today’s graphic, we use PwC data to show the world’s biggest businesses by market capitalization, as well as the countries and sectors they are from.

The Top 100, Ranked

PwC ranked the largest publicly-traded companies by their market capitalization in U.S. dollars. It’s also worth noting that sector classification is based on the FTSE Russell Industry Classification Benchmark, and a company’s location is based on where its headquarters are located.

Here is the top 100 ranking of the biggest companies in the world, organized from the biggest to the smallest.

Rank Company name Location Sector Market Capitalization
1 APPLE INC 🇺🇸 United States Technology $2.1T
2 SAUDI ARAMCO 🇸🇦 Saudi Arabia Energy $1.9T
3 MICROSOFT CORP 🇺🇸 United States Technology $1.8T
4 AMAZON.COM INC 🇺🇸 United States Consumer Discretionary $1.6T
5 ALPHABET INC 🇺🇸 United States Technology $1.4T
6 FACEBOOK INC 🇺🇸 United States Technology $839B
7 TENCENT 🇨🇳 China Technology $753B
8 TESLA INC 🇺🇸 United States Consumer Discretionary $641B
9 ALIBABA GRP 🇨🇳 China Consumer Discretionary $615B
10 BERKSHIRE HATHAWAY 🇺🇸 United States Financials $588B
11 TSMC 🇹🇼 Taiwan Technology $534B
12 VISA INC 🇺🇸 United States Industrials $468B
13 JPMORGAN CHASE 🇺🇸 United States Financials $465B
14 JOHNSON & JOHNSON 🇺🇸 United States Health Care $433B
15 SAMSUNG ELECTRONICS 🇰🇷 South Korea Technology $431B
16 KWEICHOW MOUTA 🇨🇳 China Consumer Staples $385B
17 WALMART INC 🇺🇸 United States Consumer Discretionary $383B
18 MASTERCARD INC 🇺🇸 United States Industrials $354B
19 UNITEDHEALTH GRP 🇺🇸 United States Health Care $352B
20 LVMH MOET HENNESSY 🇫🇷 France Consumer Discretionary $337B
21 WALT DISNEY CO 🇺🇸 United States Consumer Discretionary $335B
22 BANK OF AMERICA 🇺🇸 United States Financials $334B
23 PROCTER & GAMBLE 🇺🇸 United States Consumer Staples $333B
24 NVIDIA CORP 🇺🇸 United States Technology $331B
25 HOME DEPOT INC 🇺🇸 United States Consumer Discretionary $329B
26 NESTLE SA 🇨🇭 Switzerland Consumer Staples $322B
27 IND & COMM BK 🇨🇳 China Financials $290B
28 PAYPAL HOLDINGS 🇺🇸 United States Industrials $284B
29 ROCHE HOLDING 🇨🇭 Switzerland Health Care $283B
30 INTEL CORP 🇺🇸 United States Technology $261B
31 ASML HOLDING NV 🇳🇱 Netherlands Technology $255B
32 TOYOTA MOTOR 🇯🇵 Japan Consumer Discretionary $254B
33 COMCAST CORP 🇺🇸 United States Telecommunications $248B
34 VERIZON COMMUNICATIONS 🇺🇸 United States Telecommunications $241B
35 EXXON MOBIL CORP 🇺🇸 United States Energy $236B
36 NETFLIX INC 🇺🇸 United States Consumer Discretionary $231B
37 ADOBE INC 🇺🇸 United States Technology $228B
38 COCA-COLA CO 🇺🇸 United States Consumer Staples $227B
39 MEITUAN 🇨🇳 China Technology $226B
40 PING AN 🇨🇳 China Financials $219B
41 CISCO SYSTEMS 🇺🇸 United States Telecommunications $218B
42 AT&T INC 🇺🇸 United States Financials $216B
43 L’OREAL 🇫🇷 France Consumer Discretionary $215B
44 CHINA CONSTRUCTION
BANK
🇨🇳 China Financials $213B
45 ABBOTT LABS 🇺🇸 United States Health Care $212B
46 NOVARTIS AG 🇨🇭 Switzerland Health Care $212B
47 NIKE INC 🇺🇸 United States Consumer Discretionary $209B
48 ORACLE CORP 🇺🇸 United States Technology $202B
49 PFIZER INC 🇺🇸 United States Health Care $202B
50 CHEVRON CORP 🇺🇸 United States Oil & Gas $202B
51 CHINA MERCH 🇨🇳 China Financials $196B
52 PEPSICO INC 🇺🇸 United States Consumer Staples $195B
53 SALESFORCE.COM 🇺🇸 United States Technology $195B
54 MERCK & CO 🇺🇸 United States Health Care $195B
55 ABBVIE INC 🇺🇸 United States Health Care $191B
56 BROADCOM INC 🇺🇸 United States Technology $189B
57 PROSUS NV 🇳🇱 Netherlands Technology $181B
58 RELIANCE INDS 🇮🇳 India Energy $180B
59 THERMO FISHER 🇺🇸 United States Health Care $180B
60 ELI LILLY & CO 🇺🇸 United States Health Care $179B
61 AGRICULTURAL BANK OF
CHINA
🇨🇳 China Financials $178B
62 SOFTBANK GROUP 🇯🇵 Japan Telecommunications $176B
63 ACCENTURE PLC 🇮🇪 Ireland Industrials $176B
64 TEXAS INSTRUMENT 🇺🇸 United States Technology $174B
65 MCDONALDS CORP 🇺🇸 United States Consumer Discretionary $167B
66 VOLKSWAGEN AG 🇩🇪 Germany Consumer Discretionary $165B
67 BHP GROUP LTD 🇦🇺 Australia Basic Materials $163B
68 WELLS FARGO & CO 🇺🇸 United States Financials $162B
69 TATA CONSULTANCY 🇮🇳 India Technology $161B
70 DANAHER CORP 🇺🇸 United States Health Care $160B
71 NOVO NORDISK 🇩🇰 Denmark Health Care $160B
72 MEDTRONIC PLC 🇮🇪 Ireland Health Care $159B
73 WULIANGYE YIBI 🇨🇳 China Consumer Staples $159B
74 COSTCO WHOLESALE 🇺🇸 United States Consumer Discretionary $156B
75 T-MOBILE US INC 🇺🇸 United States Telecommunications $156B
76 CITIGROUP INC 🇺🇸 United States Financials $152B
77 HONEYWELL INTL 🇺🇸 United States Industrials $151B
78 QUALCOMM INC 🇺🇸 United States Technology $151B
79 SAP SE 🇩🇪 Germany Technology $151B
80 BOEING CO 🇺🇸 United States Industrials $149B
81 ROYAL DUTCH SHELL 🇳🇱 Netherlands Oil & Gas $148B
82 NEXTERA ENERGY 🇺🇸 United States Utilities $148B
83 UNITED PARCEL 🇺🇸 United States Industrials $148B
84 UNION PAC CORP 🇺🇸 United States Industrials $148B
85 UNILEVER PLC 🇬🇧 United Kingdom Consumer Staples $147B
86 AIA 🇭🇰 Hong Kong SAR Financials $147B
87 LINDE PLC 🇬🇧 United Kingdom Basic Materials $146B
88 AMGEN INC 🇺🇸 United States Health Care $144B
89 BRISTOL-MYER SQB 🇺🇸 United States Health Care $141B
90 SIEMENS AG 🇩🇪 Germany Industrials $140B
91 BANK OF CHINA 🇨🇳 China Financials $139B
92 PHILIP MORRIS INC 🇺🇸 United States Consumer Staples $138B
93 LOWE’S COS INC 🇺🇸 United States Consumer Discretionary $136B
94 CHARTER
COMMUNICATIONS
🇺🇸 United States Telecommunications $135B
95 CHINA MOBILE 🇭🇰 Hong Kong SAR Telecommunications $134B
96 SONY GROUP CORP 🇯🇵 Japan Consumer Discretionary $132B
97 ASTRAZENECA PLC 🇬🇧 United Kingdom Health Care $131B
98 ROYAL BANK OF CANADA 🇨🇦 Canada Financials $131B
99 STARBUCKS CORP 🇺🇸 United States Consumer Discretionary $129B
100 ANHEUSER-BUSCH 🇧🇪 Belgium Consumer Staples $128B

Note: Data as of March 31, 2021.

Within the ranking, there was a wide disparity in value. Apple was worth over $2 trillion, more than 16 times that of Anheuser-Busch (AB InBev), which took the 100th spot at $128 billion.

In total, 59 companies were headquartered in the United States, making up 65% of the top 100’s total market capitalization. China and its regions was the second most common location for company headquarters, with 14 companies on the list.

Risers and Fallers

What are some of the notable changes to the biggest companies in the world compared to last year’s ranking?

Tesla’s market capitalization surged by an eye-watering 565%, temporarily making Elon Musk the richest person in the world. Food delivery platform Meituan and PayPal benefited from growing e-commerce popularity with their market capitalizations growing by 221% and 151% respectively.

Tech companies TSMC and ASML Holdings were also among the top 10 risers, thanks to a shortage of semiconductor chips and growing demand.

On the other end of the scale, Swiss companies Nestlé, Novartis, and Roche Holding were all among the bottom 10 companies by market capitalization growth. China Mobile was the only company to decline with a -12% change. The company was delisted from the New York Stock Exchange as a result of an executive order issued by former president Donald Trump, and recently announced its intention to list on the Shanghai Stock Exchange.

A Sector View

Across the 100 biggest companies in the world, some sectors had higher weightings.

Sector Total Market Cap in Top 100 % of Top 100 Market Cap Number of Companies in Top 100
Technology $10.5T 33.0% 20
Consumer Discretionary $6.0T 18.9% 17
Financials $3.4T 10.8% 14
Health Care $3.3T 10.5% 16
Energy $2.7T 8.5% 5
Consumer Staples $2.0T 6.4% 9
Industrials $2.0T 6.4% 9
Telecommunications $1.3T 4.1% 7
Basic Materials $0.3T 1.0% 2
Utilities $0.1T 0.5% 1

Technology had the highest market capitalization and was also the most common sector, with Big Tech dominating the top 10. Companies in the consumer discretionary, financials, and health care sectors also had a strong representation in the ranking.

Despite having only five companies on the list, the energy sector amounted to almost 10% of the top 100’s market capitalization, mostly due to Saudi Aramco’s whopping valuation.

An Uncertain Recovery

From near market lows on March 31, 2020, all sectors saw increases in their market capitalization. However, top 100 companies in some sectors outperformed their respective industry index, while others did not.

Sector Performance of Biggest Companies in the World

Basic materials and industrials, both cyclical sectors, were high performers in the top 100 and outperformed their respective industry indexes. Technology companies also outperformed, and accounted for $255 billion or 31% of all shareholder distributions by the top 100, far more than any other sector. Apple alone spent $73 billion on share buybacks and $14 billion in dividends in the 2020 calendar year.

On the other hand, the worst-performing sectors in the top 100 were health care, utilities, and energy. While the index performance for health care and utilities was also relatively poor, the wider energy sector performed fairly well.

It’s perhaps not surprising that all sectors saw positive returns since their low levels in March 2020, buoyed by fiscal stimulus and central bank policies. As countries begin to reopen, will the value of the biggest companies in the world continue to climb?

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Source: https://www.visualcapitalist.com/the-biggest-business-risks-around-the-world/

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RCEP Explained: The World’s Biggest Trading Bloc Will Soon be in Asia-Pacific

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When we’re in our comfort zones, we’re more likely to feel safe and familiar—and this same psychological effect is at play when we’re choosing where to invest. In fact, it’s widely understood that investors tend to prefer investing in their home country instead of taking a more global perspective, a behavior known as home bias.

However, investors could consider expanding their geographic exposure. From Shanghai to London, 20 of the world’s stock exchanges have a market capitalization above $1 trillion.

This infographic from MSCI highlights the possibilities in international equity investing. Let’s dive into some of the key concepts covered in the visualization.

Consider Correlations

For starters, by looking abroad, investors may be able to include markets in their portfolio that have relatively low correlation with their home market. This means the market movements are not as closely aligned, and the markets may behave differently from one another.

For instance, the U.S. has varying degrees of correlation with international stock markets. A correlation of 0 indicates there is no relationship between the market movements, while a correlation of 1 indicates that they move the exact same percentage in the same direction.

Country Correlation With U.S. Market
Japan 0.11
Taiwan 0.21
Korea 0.24
China 0.43
UK 0.58
France 0.59

Daily correlations based on data from December 31 2015-December 31 2020.

In the past, adding less correlated markets to a portfolio has helped to reduce overall volatility.

Manage Potential Concentration Risk

Technology companies have become more dominant in major U.S. stock indexes due to their strong performance. In the MSCI USA Index, for example, the weighting of FAANG stocks has doubled from about 8% in 2019 to more than 16% in 2021.

This increased concentration means that more of the performance and risk of each index can be driven by this small number of stocks. Branching out geographically can help to reduce that concentration risk.

Access Alternative Revenue Sources

Investors that focus in the U.S. may find their exposure to revenues and potential growth from other regions is limited. For example, only 31% of the MSCI USA Index’s revenue exposure comes from areas outside North America.

On the other hand, the MSCI All Country World Index derives about 70% of its revenue exposure from regions outside North America. As investors move towards a more global portfolio, they increase their exposure to revenue and potential growth from other regions.

Gain Exposure to Economic Growth From Other Regions

While GDP growth in developed economies has been more consistent, growth in emerging markets has been higher. For example, emerging markets typically experience higher GDP growth as they transition to industrial economies with higher standards of living.

Here is historical and projected data for various regions, based on average annual GDP growth.

Historical and Projected GDP Growth by Region

  2001-2020 2021P-2025P
Europe 1.45% 2.82%
North America 1.63% 2.84%
Pacific 2.52% 2.80%
World 3.33% 4.12%
Emerging Markets 5.12% 5.10%

Note: Projections as of April 2021. The Pacific region represents Japan, Hong Kong, Singapore, Australia, and New Zealand.

Emerging markets had GDP growth that outpaced other regions in the past, and the International Monetary Fund projects that they will continue to experience above average growth.

Increase Exposure to Innovation

Thematic investing is one way to gain exposure to innovation, and international investing is another potential method.

Innovation goes far beyond Silicon Valley, and is heating up abroad. In fact, over 70% of total R&D spending in 2018 originated outside of North America. Israel, Korea, and Taiwan were the top spenders as a percentage of GDP. By taking part in international equity investing, investors can aim to capitalize on new developments.

Access Attractive Valuations

Emerging markets have an attractive price relative to their return on equity, a measure of a stock’s profitability.

  Price to Book Value Return on Equity
U.S. 4.4 13.7
Emerging Markets 2.0 9.2
Europe & Middle East 1.9 8.5
Pacific 1.6 6.4

Data as of December 2020.

Emerging markets offer the second highest return of equity of the group, at a much lower price to book value than U.S. stocks. In other words, emerging market stocks offer strong investor returns in comparison to the price paid to obtain them.

Broadening Horizons With International Equity Investing

While many investors succumb to home bias, they could consider a wider set of investment options around the world. By engaging in international equity investing, investors can:

  • Aim to increase diversification and manage risk
  • Take advantage of growth opportunities
  • Access emerging markets

Global markets are changing. As innovation and growth accelerate outside North America, investors may want to consider new possibilities.

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Source: https://www.visualcapitalist.com/rcep-explained-the-worlds-biggest-trading-bloc-will-soon-be-in-asia-pacific/

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Euro 2020: Qualified Nations and Past Winners

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The 2020 European Championship Returns with New Rules

After a year-long delay, the 2020 UEFA European Championship is set to kick off what will be the largest international sports tournament to take place since the pandemic.

While the final stage of the tournament typically takes place in one or two nations, this year’s will be played across 11 different countries.

Running from June 11th to July 11th 2021, the opening game between Italy and Turkey will kick off at the Stadio Olimpico in Rome, and the final will take place at London’s Wembley Stadium.

COVID-19’s Impact on Teams and Spectators

Aside from the initial year-long delay, COVID-19 has changed how teams and spectators will participate in the tournament.

Squads have been expanded from 23 to 26 players, and coaches will be permitted to call up more players if COVID-19 infections force players into isolation.

For spectators, individual stadiums within host cities have announced varying capacities ranging from 20-100%, with strict stadium entry requirements across the board. Since these capacities are pre-tournament estimates, we’ll have to wait until matchday to see how many ticket-holders are comfortable attending the fixtures in person.

Host Stadium and City Spectator Capacity
Johann Cruijff ArenA, Amsterdam 25-45%
Baku Olympic Stadium, Baku 50%
Arena Națională, Bucharest 25-45%
Puskás Aréna, Budapest Aiming for 100%
Parken Stadium, Copenhagen 25-45%
Hampden Park, Glasgow 25-45%
Wembley Stadium, London Minimum of 25%
Football Arena Munich (Allianz Arena), Munich Minimum of 14,500 spectators (~22%)
Stadio Olimpico, Rome 25-45%
Estadio La Cartuja, Seville 25-45%
Krestovsky Stadium (Gazprom Arena), Saint Petersburg 50%

Source: UEFA

More Substitutions and the Video Assistant Referee System

This edition of the tournament will also feature two new rule changes to the action on the field.

Coaches will now be able to make up to five substitutions (six if the match goes to extra time), a change first introduced in domestic leagues to allow players more rest as match calendars became congested.

Another key change which was already in play at the 2018 FIFA World Cup is the Video Assistant Referee (VAR) system. This system appoints a match official who reviews the head referee’s decisions with video footage, and allows the head referee to conduct an on-field video review and potentially change decisions.

Strong Competition Among Euro 2020’s Favorites

Despite current world champions France remaining as undeniable favorites, bookies are putting England to win the tournament (despite a fairly young squad) partially due to the home field advantage in the semi-finals and final.

Spain, Germany, and Italy remain formidable competitors, and Belgium’s golden generation will have one final shot at silverware after their third place finish at the 2018 FIFA World Cup.

European champions Portugal are another obvious threat, as Cristiano Ronaldo will be looking to become the tournament’s top goalscorer of all time (currently tied with Michel Platini at 9 goals).

While the 2020 edition of UEFA’s European Championship features a variety of on-field and off-the-field changes, the trophy truly feels up for grabs and is a welcome return to international football for fans around the world.

»Like this? Then you might enjoy this article, The Top 10 Football Clubs by Market Value

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Source: https://www.visualcapitalist.com/euro-2020-qualified-nations-and-past-winners/

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The Biggest Companies in the World in 2021

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In 2021, investors continue to embrace environmental, social, and governance (ESG) investments at record levels.

In the first quarter of 2021, global ESG fund inflows outpaced the last four consecutive quarters, reaching $2 trillion. But while ESG gains rapid momentum, the CFA Institute shows that 33% of professional investors surveyed feel they have insufficient knowledge for considering ESG issues.

To help investors understand this growing trend, this infographic from MSCI helps provide a fact check on five common ESG myths.

1. “ESG Comes at the Expense of Investment Performance”

Fact Check: Not necessarily

Worldwide, ESG-focused companies have not only seen higher returns, but stronger earnings growth and dividends.

Returns by ESG Ratings Earnings Growth* Active Return** Dividends and Buybacks
Top tier 2.89% 1.31% 0.28%
Middle tier 1.35% 0.12% -0.02%
Bottom tier -9.22% -1.25% -0.05%

Source: MSCI ESG Research LLC (Dec, 2020)
*Contribution of earnings growth and dividends/buybacks to active return
**Active return is the additional gain or loss compared to it respective benchmark

In fact, a separate study from the CFA Institute shows that 35% of investment professionals invest in ESG to improve their financial returns.

2. “Investors Talk About ESG But Don’t Invest In It”

Fact Check: False

Global ESG assets under management (AUM) in ETFs have grown from $6 billion in 2015 to $150 billion in 2020. In just five years, ESG AUM have accelerated 25 times.

Today, money managers are focusing on the following top five issues:

Top ESG Issues Assets Affected Growth in Assets Affected (2018-2020)
Climate change / carbon emissions $4.18T 39%
Anti-corruption $2.44T 10%
Board issues $2.39T 66%
Sustainable natural resources / agriculture $2.38T 81%
Executive pay $2.22T 122%

Source: US SIF Foundation (Nov, 2020)

Meanwhile, over 1,500 shareholder resolutions focused on ESG-related matters were filed between 2018-2020. Not only are investors turning to ESG assets, but they are placing higher demands on corporate responsibility.

3. “ESG Investment Strategies Eliminate Entire Sectors”

Fact Check: Not necessarily

First, not all ESG investment approaches are exclusionary.

For instance, in North America roughly 51% of ESG ETFs used an ESG integration approach as of Dec. 31, 2020. In an ESG integration approach, ESG risks and opportunities are analyzed with the goal to support long-term returns.

By comparison, values and screens approaches, which accounted for over 22% of ESG ETFs in North America may screen out specific business activities, such as alcohol or tobacco, or sectors such as oil & gas.

Percentage of ESG Type Integration Values & Screens Thematic Impact
North America 50.9% 22.5% 20.7% 5.9%
Asia 57.8% 34.6% 3.8% 3.8%
Europe 30.8% 60.6% 8.6% 0.0%
Australia 28.6% 71.4% 0.0% 0.0%

Source: Refinitiv/Lipper and MSCI ESG Research LLC as of Dec 31, 2020 (MSCI Feb, 2021)

Second, companies are assessed on a sector-specific basis where ESG leaders and laggards are identified within each sector in comparison to peers. In other words, ESG doesn’t mean eliminating exposure to entire sectors. Instead, investors can choose from a range of companies based on their ESG ratings quality.

4. “ESG Investing Is Only For Millennials”

Fact Check: False

Although ESG is popular among millennials, ESG investing is being driven by the entire investor population. In 2019, one study finds that 85% of the general population expressed interest in ESG investing.

Interest in Sustainable Investing General Population Millennials
2019 85% 95%
2015 71% 84%

Source: US SIF Foundation (Nov, 2020)

Sustainable investing goes far beyond millennials—ESG disclosures are quickly becoming requirements for key industry participants, such as institutional investors and listed companies.

5. “ESG Investing is Here to Stay”

Fact Check: True

Climbing 28% in 2020 alone, over 3,000 signatories have committed to the UN Principles of Responsible Investment. As of the first quarter of 2021, 313 global organizations and 33 asset owners have been newly added.

Growth of UN PRI Number of Signatories* AUM Represented
2020 3,038 $103.4T
2019 2,370 $86.3T

Source: UN PRI
*As of Mar, 2020

Central to ESG’s growth is the availability of ESG investments. ESG investing has become more widely accessible—which wasn’t always the case. Over the last decade, the global number of ESG ETFs has grown from 46 to 497.

Why the Facts Matter

As ESG investments continue to play an even greater role in investor portfolios, it’s important to focus on data rather than prevailing ESG myths that are not backed by fact.

Given the recent momentum in investment returns and ESG adoption, data-driven evidence empowers investors to build more sustainable portfolios that better align with their investment objectives.

Coinsmart. Beste Bitcoin-Börse in Europa
Source: https://www.visualcapitalist.com/the-biggest-companies-in-the-world-in-2021/

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