The Terminology of ESG Investing

At a recent TSESG event in New York, a straw poll revealed that only 10% of attendees believed the term ESG investing would persist in five years. Some attendees expressed the view that the term is toxic and will vanish in the US, implying significant implications for marketing, branding, and communication efforts. However, evidence suggests a mixed outlook. Schroders and BlackRock have adopted alternative terminology, with BlackRock focusing on transition investing. In the US, around 20% of ESG funds have rebranded, while in Europe, some funds have shifted from Article 9 to Article 8, with a notable number removing ESG-related terms from their names. Despite these changes, there are still approximately 160 US mutual funds and 90 ETFs with ESG in their names. The SEC s tightened fund naming rules add complexity for asset managers. Despite an ESG recession, the momentum of decarbonization has become deeply ingrained, making it challenging to envision ESG disappearing quickly. The presence of ESG in job titles and investment roles, as well as the increasing number of ESG investment job postings, indicate its embeddedness in the asset management industry. ESG has become intertwined with the asset management business, and it is likely to continue as a neutral source of data and insights for investors and regulators. Sustainable investing is emerging as a significant terminology, while thematic and impact investing are gaining traction among institutional investors. The term ESG has advantages, such as being a distinct acronym that is easily searchable and understood. However, asset managers must carefully consider market research and long-term strategies to navigate potential shifts in terminology. Millennial and Gen-Z investors, as well as minorities, show strong support for ESG, particularly in the social aspect. November 5 in the US may influence ESG s future, but the climate transition embedded in the IRA suggests a major shift away from sustainable investing is unlikely. Asset managers must adopt an integrated approach, from investment to marketing and sales, to effectively

Source: cognitomedia.com
Published on 2024-09-18

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