News that oil, coal and natural gas will play a less dominant role in global energy is being used to warn investors that “anti-ESG” measures could hit their wealth.
Ignoring the rise of ESG could hurt stock performance and leave investors missing profitable investment opportunities, said Nigel Green, chief executive of deVere Group.
Green referenced the International Energy Agency (IEA) World Energy Outlook for 2023, published on Tuesday (24th), that stated demand for oil, coal and natural gas is set to peak by 2030.
“Yet despite this evidence that cleaner energy is the future – and, therefore, should be uncontroversially appealing to investors – the anti-ESG movement is real and is growing.”
The IEA report, said deVere, shows that there is a “major evolution” taking place in how the planet is powered and that the “unprecedented rise” of clean energy technologies, including wind, solar, heat pumps and electric cars, will play a vital role in future.
He warned that investors’ money “could be being repositioned away from ESG” after The Conference Board of more than 100 large US companies recently revealed that almost half said they had already “experienced ESG backlash”, and 61% anticipated it to continue or intensify over the next two years.
Green said: “Anti-ESG proponents, including some financial advisors, often argue that ESG investing is just a trend that will eventually fizzle out. However, the data suggests otherwise.”
He said the rise of ESG was not a fad and instead reflected changing market dynamics and consumer preferences that should not be ignored.
“Anti-ESG proponents may encourage you to miss out on profitable investment opportunities. Numerous studies have shown that companies with strong ESG performance often outperform their peers. Ignoring this data may lead to missed opportunities for portfolio growth,” he said.
Companies that perform well in ESG criteria tend to be better prepared to navigate a range of challenges, from environmental disasters to social controversies, said Green and “if you overlook these considerations, you may find your investment portfolio vulnerable to unforeseen risks that can lead to financial losses”.
He added: “The anti-ESG movement – which is alive and well and becoming increasingly powerful – fails to see the bigger, longer-term picture.
“Our concern is that people will be coerced into this narrow, backward-looking view and miss out on major opportunities that could negatively affect their prospects for growing and safeguarding their wealth.”
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