Green investing may actually be approaching a tipping point

Delano’s Aaron Grunwald is cautiously optimistic about ESG investing in 2022. Photo: Maison Moderne

Delano’s Aaron Grunwald is cautiously optimistic about ESG investing in 2022. Photo: Maison Moderne

For years, “ESG” has been fuzzy financespeak, but 2021 was the year ESG started to materialise and take shape, opines Delano financial journalist Aaron Grunwald. He reckons this is reducing the risk of greenwashing in the investment sector, even if the funds industry remains very much in a transition phase.

ESG funds use environmental, social and governance criteria to screen out or select in investments. These have been given a push under the EU’s recent Sustainable Finance Disclosure Regulation. There has been palpable excitement about these types of “good investments” for years in Luxembourg. Much of that was clearly marketing hype, even if you could charitably call it aspirational. Cynics could say much of that was simply greenwashing.

However, in 2021, government pressure and investor sentiment seem to have spurred a noticeable shift. The influence of ESG has started to make its mark. ESG investment practises are taking real shape, even though the industry is very much in a transition phase.

Ten notable or nerdy ESG stories from the past year

Record-breaking ESG interest leads funds to shift focus, 18.02.21

Pierre Gramegna: “We ain’t seen nothing yet”, 28.02.21

“Being on risk, you have kind of the full picture”, 11.06.21

Simple vs sophisticated, 06.10.21

Collective impact, 07.10.21

Data gaps slowing but not stopping ESG goals, 08.10.21

Exclusion can be a blunt tool when it comes to CO2 emissions, says Fidelity, 02.11.21

Stronger inflows going to private equity funds with ESG focus, 07.11.21

How the EU and US can help each define good investing, 16.11.21

Office demand holds, but new rules will hit valuations, 18.11.21

Looking ahead

Investment firms have the hard task of essentially reviewing every single fund on their books and deciding to revamp some parts of it or not. Then there’s the (probably more difficult) challenge of communicating this all to investors, particularly retail savers, although institutional punters might need lots of convincing too.

I imagine that ESG will remain a topline issue (and a much bandied about buzzword) in Luxembourg’s financial sector for the next, say, five years. That said, the fund industry’s stated aim is to make a positive impact in combatting the climate crisis. It’s just possible that we’ll see huge steps forward in 2022.