ESG boom: problems and perspectives.
2021 brought us many issues from the past year including continuing pandemic and climate change. People started to think about it seriously simply because it literally affects us daily.
Of course, politics go together with the public opinion and the brightest example is a new elected USA President Biden. His ambitious plan to make America green, low carbon emission country by 2035 and return to Paris agreement raised a lot of speculations and interest among investors.
From one side it is a predictable move after Trump’s policies. Biden wants to keep American leadership worldwide and one way to do so is to establish clear environmentally friendly policies/regulations. It can be a green investment initiative, climate risk calculations for the USA companies and so on.
“Assets under management in funds that abide by environmental, social and governance (ESG) principles have surpassed $1 trillion for the first time on record, according to data compiled by Morningstar.”
This ESG boom implements a number of problems.
First, ESG is not purely commercial activity. It is a complex ecosystem, with governmental regulations and sustainability goal in long run. These factors affect cost-profit performance. Simply speaking, investment product doesn’t do exactly what is claims.
Second, urgent climate matters must be solved, but solutions are still not provided. There is a gap between real climate change problems and related solutions. Investors are aware of it.
Third, standards and definitions for ESG are not efficiently developed. This fact creates controversy and complications in the investment process.
ESG will rise in 2021 as well as creating more green projects. However, ordinary people have to be educated about it. For example, about recycling, safety, electricity access and consumption, related environmental challenges and so on. We need precise planning and new solutions for ESG related investments and products. We are still far away from solving pollution problems or human rights abuse issues connected to green technologies.
I hope that 2021 will bring more good ideas and sustainable projects as well as environmental solutions to us.
