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Banks Double Down on ESG Investments

Banks Double Down on ESG Investments

Environmental, Social, and Governance (ESG) are factors that determine the social impact of an investment or institution. Large organizations, such as banks, use ESG as a way to highlight efforts or initiatives that are bettering society. In the investing world, ESG ETFs or mutual funds give investors a chance to put money into areas that are set to have a positive impact on the world.

Heaps of money have been put into ESG investments over the last two years -- $1 trillion to be exact. Investors and institutions that believe in operating with an ESG focus have been questioned; many people do not believe that these initiatives can be profitable, but as the landscape for ESG matures, the future is bright, and banks think so too.

Because of recent turbulence in the economy, it might seem safe to assume that banks will pull back some of their momentum around ESG, but that’s simply not the case. In a survey of over 500 banking executives, 76% believe that the financial services industry plays a critical role in addressing societal issues. 64% of the same executives think that banking is behind other sectors in prioritizing ESG goals.

While short-term costs surrounding ESG goals can seem high, and immediate payoffs make the trade-off appear to lack worth, investing in these areas pays off in the long run. If no action is taken to address climate change and solve ESG-related issues, the world GDP is set to lose 18% by 2050, and that’s a bigger cost than any of us can imagine.

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