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ESG investing to remain strong through pandemic

Despite COVID-19 shaking the world to its core, the themes underpinning ESG investing are not about to change, according to a global asset manager.

Having destroyed the best laid plans of investors the world over, investment managers are asking how the COVID-19 pandemic will impact ESG investing, which continues to grow in popularity.

According to BNP Paribas Asset Management head of stewardship Asia Pacific Gabriel Wilson-Otto, ESG investing can be at the core of asset managers' response to the pandemic.

Wilson-Otto highlighted the strong relationship between business resilience and sustainability, and sustainable funds' continued strong inflows, pointing to Morningstar's finding that ESG assets in Asia Ex-Japan grew by 21% in the first quarter despite the recent decline of equity markets.

"Sustainable investment practices can help companies identify and mitigate a wider range of risk, while also seizing on a broader opportunity set to help drive growth," Wilson-Otto said.

"For investors, ESG integration can supplement traditional analysis, help identify risks, and increase the odds of finding tomorrow's industry leaders."

He said social expectations and consumer demand were continuing to shift toward sustainable practices, meaning sustainability makes "good business sense".

Wilson-Otto noted 40% of millennials in the US have chosen a job because of the employers' sustainability performance, as opposed to 17% of baby boomers, and added that COVID-19 had "put a spotlight" on corporate culture, behaviour, the treatment of employees and the resilience of prior operational strategies.

With billions of dollars set to be spent on stimulating economies in the wake of the pandemic, Wilson-Otto also said there was a "unique opportunity to turbo charge initiative to combat climate change".

"This isn't the first time the world has been rocked by a crisis, however the salience of climate change, shifting social expectations, broad availability of sustainable investment products and increasingly competitive economics of renewable energy systems all help increase the odds of a sustainable recovery," Wilson-Otto said.

Overall,  while ESG and sustainable investments have previously been seen as philanthropy, the trends he mentioned highlight that firms can "do good" while performing well.

"We hold that robust ESG integration and strong investment stewardship practices can help generate differentiated investment insights, help contribute to differentiated performance and also contribute positively to sustainable and equitable economic growth," Wilson-Otto said.

Read more: ESGSustainableBNP ParibasGabriel Wilson-OttoMorningstar
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