How are James Bond and The Incredible Hulk really saving the planet?

What do Pierce ‘James Bond’ Brosnan and Mark ‘The Incredible Hulk’ Ruffalo have in common with fellow actors, Leonardo di Caprio and Cate Blanchett, rapper Drake, pop star Beyonce and Prince Harry and Meghan Markle? Answer: they are all celebrities leading the charge in green activism and ESG investing.

Environmental, Social and Governance (ESG) investing has been around for a while but is now gaining traction as an approach to the choice of investments. Socially conscious investors, and that means more and more of us, not just celebrities, are looking to invest in companies which don’t just provide good financial returns but whose values align with their own. Some of the factors they might scrutinise include:

• Environment: Does the company have a positive or negative effect on the environment? Does it use toxic chemicals in its manufacturing processes. How is it reducing its carbon footprint and how is it husbanding scarce resources;
• Social: Does the company’s business benefit or harm society? What is it doing to foster equity, diversity and inclusion; and
• Governance: How does the company’s leadership promote positive change. How do they deal with executive pay? How diverse is its leadership? How does the company interact with its stakeholders?

Although millennials are driving the trend towards ESG investing, the desire to invest according to values is spreading across the generations. According to Prudential’s Family Wealth Unlocked report, 61% of those surveyed said they cared more about the environment and sustainability than before the pandemic and they are putting their money where their mouth is. 60% of millennials, 44% of Gen-X and 35% of Baby Boomers confirmed that the pandemic has increased their appetite for sustainable investment. 39% are planning to increase the amount of their ESG investment in the next five years and 45% say that since the pandemic, they now only want to invest in ethical companies and funds. These are big numbers and indicate that ESG investing is, or is certainly becoming, mainstream.

But does socially responsible investment mean lower financial returns? There is a growing body of evidence that in the longer term, ESG investments outperform their non-ESG counterparts. And why wouldn’t they? A company which is well run, recruits and promotes the best talent from the widest social pool, seeks to use resources efficiently and whose business addresses urgent societal issues is likely to be driven to perform well financially.

We can expect more businesses to address how they can benefit society and more investors to want to hold them to account.