ESG investing Top three ESG investment themes

#1: Renewable energy and energy efficiency

Not only is this investment needed, it has also proved profitable.

Imperial College London and the IEA analysed stock-market data to determine the rate of return on energy investments over five and ten years (starting in January 2010 and ending in December 2019) and found that renewable energy consistently outperformed fossil fuel investments.

Renewable energy stocks were also found to be less volatile, particularly during the turmoil caused by the pandemic, when oil and gas prices collapsed.

Source: ¹The Economist Intelligence Unit: Resetting the agenda, How ESG is reshaping our future

#2: Cybersecurity and data privacy

Cybersecurity and data privacy rank is also a top priority, given the potential that cyber-attack threats could lead to heavy financial losses and social instability.

This is an issue that has been growing in prominence over the years, but has perhaps come to the forefront now as a consequence of the pandemic, which has led to a significant rise in the use of digital technologies and a mass move to home-working.

Although cybersecurity is not an obvious ESG issue, ensuring that data and systems are secure is not just necessary for the smooth running of a business – it also protects the privacy of customers and employees, making it a social issue as well.

#3: Climate change adaptation and mitigation

Adaptation and mitigation is the second greatest area in which investors see an opportunity for ESG investment.

It drew the greatest level of attention from investors in Asia-Pacific, at 35%.
This is unsurprising, given that this is a region expected to bear the brunt of climate change, and therefore at greatest risk from failing to address this issue.