The acronym in English ESG, stands for Environmental, Social and Governance, represents a concept that has been growing more and more in the world and guided towards investments. In this way, ESG defines environmental, social and governance sustainability criteria for new projects or for conducting business.
In the electricity sector, the change in mentality provoked investors, who are more discerning in their decisions. “We started to see a big movement of companies trying to clean up their matrix and some developers understanding that despite having a lower initial rate of return for renewable assets, in the medium and long term the projects could get cheaper financing”, explains Alexandre Americano, founding partner of Mercurio Partners.
Learn more about the 3 ESG sustainability criteria:
- Environmental: concern to minimize environmental impacts, CO2 emissions, energy efficiency, waste disposal, water use, environmental preservation, among others;
- Social: respect for employees’ rights, work safety, promotion of well-being, etc.
- Governance: good corporate governance practices such as promoting diversity, transparency, prioritizing ethics, etc.
This switch in market behavior is accompanied by a change in the mindset of new generations. Data show that, in general, the priorities of millennials – the generation born approximately between 1980 and 2000 – are closely linked to responsibility and social impact. According to a study by Nielsen*, 74% of people in this generation would pay more for sustainable products or solutions.
In this sense, companies are increasingly seeking renewable targets, such as Vale, which aims to achieve 100% self-production from renewable sources in Brazil by 2025 and 100% of renewable electricity consumption globally by 2030. Apple also follows the same flow: the goal is to reduce emissions by 75% by 2025. Since 2018, the company has neutralized carbon from its factories, stores, offices and data centers in 44 countries through investments in renewable energies, energy efficiency actions and use of recycled components.
According to data collected by Morningstar, in 2020, investments in ESG funds reached 250 billion dollars**. The United States corresponds to 20% of this share — with a growth of 400% in the last 3 years.
In conclusion, speaking of profitability, according to Estadão, more than 60% of the ESG*** funds in the United States had above-average results. This percentage in traditional funds is less than half.
Finally, this can be considered the “new norm”, thanks to the growth of ESG practices and the appreciation of responsible business with the environment, society and its own management
The trend in the current market is that more and more companies adopt these guidelines, in order to make them more attractive to potential investors.
According to data collected by Morningstar, in 2020, investments in ESG funds reached 250 billion dollars**. The United States corresponds to 20% of this share — with a growth of 400% in the last 3 years.
In conclusion, speaking of profitability, according to Estadão, more than 60% of the ESG*** funds in the United States had above-average results. This percentage in traditional funds is less than half.
Finally, this can be considered the “new norm”, thanks to the growth of ESG practices and the appreciation of responsible business with the environment, society and its own management.
Credit Given to:
*** https://einvestidor.estadao.com.br/investimentos/fundos-esg-comparacao-fundos-tradicionais