To think, under the fog of a global pandemic, social unrest and economic duress, we started a decade that, in a look back years from now, could rank as the year we not only just talked about but acted the most on the initialism that’s just about everywhere in the business community. Those initials are E, S, and G.
One could argue – and I attempt to do so hastily here – that what helped the business world make such progress is human curiosity. Though, if ESG’s best friend is curiosity, then it wouldn’t be much of a friend without action.
For years, people have been asking questions about how they can use their resources to push for positive change in global business. In the U.S., what we’ve learned in 2020 is that more and more people care about how their investment decisions could and should influence positive change at less of a financial risk than once thought. Major U.S. corporations have finally followed suit behind their European counterparts.
In the case for motivating more companies to weigh their climate, social and governance-driven business decisions, what will matter in the months and years to come – notwithstanding the results of the 2020 U.S. presidential election – are the voices of corporate leadership, more positive change, as well as people’s appetite to remain informed.
In the last 12 months, ESG as a search term in the U.S. reached near peak popularity (94) in January, according to Google Trends. Google rates search terms on a scale of 1-100. A value of 100 is the peak popularity for the term. At the time, MSCI CEO Henry Fernandez said investment managers would be greatly remiss if they ignored sustainable investment criteria. As reported by CNBC: “We are sounding the alarm bells that if you are an investment institution and you’re not embracing this and taking it into account, it’s going to be at your own peril.” In 2019, Morningstar reported ESG funds saw record inflows.
“ESG” search fell off a cliff in March and April, clocking in at a Google Trends score of 29-59, as interests shifted to the pandemic. Then something happened in May and June when the score shot right back up to 100. The investment community connected the dots between global health and the eventual economic crisis to how private sector attitudes and action could lead to a more prepared world, a better world. One where a greener planet, more workplace diversity, and a more inclusive definition of the word “stakeholder” wasn’t just lip service.
Wall Street responded. On the equities front, the Wall Street Journal reported that amid market turmoil, ESG-themed investments performed well and in some cases better than non-ESG plays.
On the policy front, Bloomberg reported The Securities and Exchange Commission’s Investor Advisory Committee advised the “time has come” for the agency to consider requirements for certain environmental, social, and governance factors in public company disclosures.
On the corporate front, Reuters reported that Citigroup launched a new ESG investment banking unit. Several weeks later, Citi would become the first among the largest banks to name a female CEO.
Of course, progress is not without its roadblocks.
In June, the U.S. Department of Labor said it would try to keep ESG investment options from retirement plans because they put the fiduciary in a position to potentially prioritize social good before investment returns. Then we were reminded why balloons aren’t made of lead. People spurred into action. ThinkAdvisor reported that since the DOL announced the proposal, “the department has reportedly collected about 1,500 comments, though it only posted 1,100 comments on its website — most of them negative, except for a handful from conservative political groups such as Americans for Prosperity and the Conservative Union.”
What’s more, we’ve still got three-and-half months left! Just what will our questions, our conversation, and our curiosity bring before we ring in a new year? Whatever positive change that may be, there is science to help make the case. This is me reaching but check this out.
In November 2015, two scientists published a report titled “The Psychology and Neuroscience of Curiosity.” Among the things they considered is how much of our time we spend seeking and consuming information that goes beyond our basic survival, this includes those Wikipedia and IMDB rabbit holes that we fall down into from time to time. Among many other things, what the scientists learned is that “our insatiable demand for information drives much of the global economy.”
How about that? The production, distribution and consumption of goods and services in the entire world relies on your constant desire to learn. Now, it stands to reason that this curiosity could be driving ESG, too.
Matt Kirdahy is Partner at Water & Wall, an integrated financial marketing and communications agency.
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