Global governments must pull together to create a framework for environmental, social and governance investing, according to deVere Group founder Nigel Green.
The call to action from Green comes as a growing number of investors turn their attention to ESG in the wake of Covid-19.
Green says: “Environmental, social and governance investing is this decade’s ultimate investment megatrend – and it has been accelerated since the pandemic began.
“There’s been a dramatic increase of inflows into the sector from both retail and institutional investors as it has become clearer than ever that human health is reliant upon healthy ecosystems; that we need to ensure the sustainability of supply chains; and that those companies with robust corporate governance and good business practice fare better in difficult times and are ultimately best-positioned for the future.”
According to Green, this trend is set to accelerate going forward, with millennials more likely to seek responsible investment options. In addition, recent research has shown that the majority of environmental, social and governance investments outperformed their non-sustainable counterparts over the last year and have had lower volatility.
Against this backdrop, Green believes more must be done to ensure the regulatory environment is fit for purpose.
He explains: “Regulators need to catch up. Initiatives that began in the EU are now spreading worldwide, but much more needs to be done, at a faster pace and with a joined-up approach. There remains a startling lack of consistency in definitions and data.
“Considering the momentum of the sector, the time is now for the establishment of a global regulatory framework for ESG investing.”
Green argues that a global regulatory framework would provide greater protections for investors looking for profits with purpose, while helping to reduce greenwashing, where investments or companies given an inaccurate impression of their green credentials and social responsibility.
Green adds: “A robust standardised regulatory framework would make the sector even more attractive, which will then help investors reach their financial goals whilst proactively protecting people and the planet.”