It has often been debated whether you have to sacrifice returns for ESG integration. However, a recent Bank of America (BofA) study showed that an investment strategy focused on buying stocks that rank well on ESG metrics could outperform the market by up to 3 percentage points per year over the last five years*.

As ESG investing moves from niche to norm it’s estimated that over the next two decades $20 trillion of asset growth will occur in ESG funds – this is equivalent to the size of the S&P 500 today*. Women, millennials and high-net-worth individuals are thought to be part of the demographic drivers of this trend.

Demand for companies to be more transparent in how they manage ESG issues is not only coming from investor interest, but also the evolving regulatory environment. Policymakers globally are continuing to develop new regulation promoting disclosure of ESG metrics and the management of climate risk. Companies that don’t address these changes or manage their ESG risks (climate change, corruption etc.) could incur costs to the bottom line, which may ultimately harm long-term earnings.