New US presdient Joe Biden’s expected regulatory changes will push environmental, social and governance (ESG) investing “to become the ultimate megatrend,” states the CEO of one of the world’s largest independent financial advisory and fintech organisations.
The bold comment from Nigel Green, chief executive and founder of deVere Group, which has $12bn under advisement, comes as Biden picks Gary Gensler to head the Securities and Exchange Commission (SEC), the U.S. financial regulator.
Green says: “Joe Biden’s administration is going to usher in an era of serious momentum for responsible and sustainable investing. This is not just because of the likely tougher approach to the use of fossil fuels and his campaign’s vow to take swift action to tackle the climate emergency. It is also because of the expected appointment of Gary Gensler to lead the SEC, who is likely to heavily reform and broaden ESG investing and corporate disclosure rules in the U.S. In doing such, we can assume that Gensler would have the major support on the Commission.”
For instance, upon her appointment as acting SEC chair, Allison Herren Lee said that during her time as a Commissioner, “I have focused on climate and sustainability, and those issues will continue to be a priority for me.”
In The New York Times she wrote that: “Both investors and the broader public need clear information about how businesses are contributing to greenhouse gas emissions, and how they are managing — or not managing — climate risks internally. Realistically, that can happen only through mandatory public disclosure.”
We anticipate a wave of fund manager cash into US ESG
Should the SEC push ahead with beefing-up green investment rules, as is expected, it will close the transatlantic gap that has emerged in recent years as the European watchdogs pushed ahead with increased stricter ESG investing and disclosure regulations.
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Throughout the year inflow doubled and ESG funds outperformed the market. Data from ETF specialist TrackInsight for example seem to bear this out. The France-based ETF data specialist reported last month that investors flows into ESG-focused ETFs had tripled in 2020.
But the tag ‘megatrend’ would now seem somewhat underplayed if the U.S. moves towards ESG-related regulatory reforms and comes into line with Europe. Responsible investing will become the ultimate investment megatrend should this happen.
In a move to encourage clients to consider the ESG opportunities, last month deVere Group announced it is planning to offer free, independent advice on socially responsible investing, with the aim of positioning $1bn in environmental, social and governance (ESG) investments within five years.
The likely rule changes in the U.S. on ESG investing and corporate disclosures are not as yet heavily priced-in to markets. Investors should keep a keen eye on this area and move to take advantage of the opportunities.