2022 – investment trends to watch

Jessica Robinson

 

Many hoped 2022 would bring normalcy after a very tough and challenging 2021. But it doesn’t look that way – as we stand today, no one is really sure which way the COVID-pandemic winds will blow. With this uncertainty front of mind, what can investors look towards over the coming year and what are the 2022 investment trends to watch?

 

ESG and sustainable investing on the rise

As we entered into 2022, markets were abuzz with talk of sustainable investing and all things related to ESG (environmental, social and governance). It’s been a long time coming. Even as recent as five years ago, the mainstream investment community was largely disengaged from discussions about sustainable investing. These conversations remained firmly within niche corners of the industry.

This is shifting dramatically, with most big investors now believing sustainable investing to be good risk management, leveraging the practice to help manage risk in uncertain times. For sure, 2020 and 2021 were somewhat of a game changer in this regard because it turns out that companies that manage sustainability risks better, manage other risks better as well.

Jessica Robinson

It helps also that some big names are getting more vocal about sustainable investing. Blackrock’s Larry Fink continues to evangelize on the importance of putting sustainability at the centre of its investment strategy. With all this momentum underway, in 2022, we are going to see more investors strengthening their ESG commitments and demand for sustainable and green products growing at a rapid pace.

 

It’s all about women

In a similar way, the concept of investing with a gender lens has been on the table for a few years but now, excitingly, progress is being made. Gender lens investing is about integrating gender-based factors into investment strategies and analysis in order to increase returns and move towards better gender equality.

What does this really mean? When we invest with a gender lens, we are following an investment thesis that is essentially seeking to turn the abstract concept of investing to benefit women into something tangible and actionable. Increasingly, investors are recognising that gender lens investing can help spot market opportunities where others might miss them, and at the same time drive towards more equality in our world. We also know now that gender diversity is good for business and good for our economies.

Gender lens investing was already a growing sector that many sustainable or impact investors were interested in. But 2022 is likely to see it rapidly gaining traction across the world. In particular, in many developed markets, where we will see more and more options popping up for the gender lens investor, including angel investment networks, retail-focused funds and venture capital vehicles – all with a gender focus.

 

The role of policy and regulation

There is a great deal happening on the global policy agenda too which is shaping the way many investors are thinking – particularly about climate change and sustainability. The Paris Agreement on Climate Change gave us a global carbon budget, and we are seeing widespread commitments being made by corporates and investors alike to achieving the Sustainable Development Goals (SDGs).

These international commitments are the closet thing we have to a global strategy and for any forward-thinking investor, the priorities outlined in both the Paris Agreement and the SDGs are central to their investment decisions. This trend will likely continue at speed through 2022 as more investors, reflecting on the lessons learned from the pandemic, recognize the importance of managing the risks and seizing the opportunities associated with our transition to a more sustainable and equitable future.

 

Action on greenwashing

 There is a lot to be positive about in 2022. But there is also increasing concern over the issue of greenwashing which is leading investors down the wrong path in some instances. Particularly for retail investors, where many are relying on certain labels such as ‘green’ or ‘SDGs’ or ‘gender diversity’ to guide them in the right direction when they make an investment decision. The problem is that sometimes these labels are not properly assigned, or maybe stretching the truth. This gives the investor a false sense of comfort, not to mention the damage it does to the reputation of the sustainable investment industry as well.

Regulators are getting on top of this and 2022 will likely see a ramp up of action. Take, for example, the European Union’s Sustainable Finance Action Plan – a sea change for investors. These include new requirements to disclose the sustainability credentials of funds, and regulations aimed at boosting transparency and combatting greenwashing. The EU is certainly out front on sustainable finance regulation but countries around the world are watching closely on its success in implementation and are likely to follow suit in the months to come.

 

spot_img

Explore more