Demand for ESG investments is on the rise, but the industry as a whole will only benefit from more standardization once it reaches its full potential. In the past two years, sustainable investment has increased in value by 15% on the world’s biggest financial markets. By 2025, ESG assets are expected to surpass $50 trillion, accounting for more than a third of the anticipated $140.5 trillion in total global assets under management. Investing in green, environmentally friendly initiatives will continue to pay off for organizations that can keep up with the shifting economic landscape.
In the Middle East, sustainable investment seems to be growing at an exponential rate. Globally, sustainable investment is on the upswing, with AUM expected to grow from the current $30.7 trillion in 2018 to an estimated $35.3 trillion in 2020. How companies allocate their funds affects a company’s environment, society, and management. It puts them under pressure to be more transparent about their operations and, maybe, alter some of their methods due to that transparency.
The Middle East Is A Growing Market For ESG Investing
Sustainable assets appeal to many Middle Eastern investors from a moral standpoint, even though the economic rewards of these investments are sometimes shrouded in uncertainty. Recently, the Dubai Investing Fund announced the establishment of an ESG investment division, intending to monitor the local and global market to identify the most lucrative sustainability assets. Even in smaller GCC countries like Kuwait, ESGs are gaining traction.
Sustainable Investment Will Become Standard Practice
Sustainable investment has grown from a small but significant submarket to a rapidly expanding major industry. The willingness to invest sustainably may help create a better society, which is why it is crucial. Investors may use their money to have a promising impact on society and help society transition to a more green future. However, there are still undiscovered markets for sustainable investment. Progressive financiers are also considering environmental and biodiversity investments. Investors are increasingly beginning to delve more deeply into how businesses affect the environment.
A Common Approach To Sustainable Investing Is To Integrate ESG Factors
ESG measures how well a firm manages its environmental impact, such as its carbon footprint and water consumption. ESG also takes into account social variables like gender, ethnicity, diversity, and inclusion, in addition to governance considerations like business risk management, taxes, and reporting methods. Integrating environmental, social, and governance (ESG) factors into portfolios is becoming more critical for investors looking to reduce risk, anticipate the emergence of top performers, and boost returns.
The Biggest Obstacles: High Costs And Fees Associated With Sustainable Investments
While ESG investments are receiving a lot of attention, the high price and taxes are the main obstacles preventing companies from making them. The demand for environmentally responsible investing is on the rise, but its potential will remain untapped until there is more uniformity around ESG. Stronger global coordination between the governmental and private sectors is essential for harmonization.