Donald Trump’s presidency may end up as the best thing to ever happen to environmentally and socially responsible investing.
Even after early moves from the White House to ease regulations on the coal industry, clear the way for two controversial pipelines and move to exit or reform the Paris Agreement on climate change; and despite President Trump and his EPA Administrator, Scott Pruit, being climate change skeptics, ESG fund managers are optimistic about their future.
“Advisors are now talking about this as a client need,” says Leo Zerilli, head of investments at John Hancock Investments, the wealth management arm of Boston-based John Hancock Financial Services. “We knew that women and millennials were interested in this space. There have always been some high-net-worth investors with social and environmental issues in mind. Now we’re seeing it discusses as a must-have for advisors.”
In fact, Trump’s anti-regulatory stances could drive new interest in environmental, social and governance investing, says Ben Webster, CEO of Santa Monica, Calif.-based OWLshares, an ESG-oriented ETF sponsor.
“Oftentimes, someone who is polarizing can incite or motivate people who disagree with them to fight all that much harder,” says Webster. “His administration could increase demand and urgency in the market.”
ESG investing selects companies based on their positive attributes towards environmental sustainabiltiy and stewardship, social responsibility and citizenship, and ethically sound corporate governance. And it's more popular now in the first months of the Trump administration than ever before. According to a survey published in November 2016 by US SIF, $8.7 trillion in assets resides with U.S. managers who consider issues of environmental sustainability, social responsibility and corporate governance. The same survey counted more than 1,000 ESG-oriented funds.
By comparison, the same survey found only 200 ESG funds in 2001.
Institutional investors such as CALPERS helped drive the initial push towards ESG-oriented investing, and along with a cohort of niche fund managers, were the original full-throated social activist investors. More recently, investor coalitions organized by non-profit organizations like As You Sow have joined the movement.
The government may find reasons to make fewer investments in initiatives supporting green energy and gender diversity, but that may give investors more reason to focus on wind and solar projects and companies that hire and promote women internally.
ESG investing is being driven by clients, not policy. ESG has moved from an investment philosophy coached in naïve ideals to one that addresses financial reality that companies that adopt policies addressing ESG issues tend to perform better over the long term.