What is ESG investing?

Hong Kong’s Hong Kong Stock Exchange also conducted quantitative analysis last year to study the “magic” of ESG. According to a “Comparison of the Performance of ESG Stock Indices and Traditional Stock Indices” released last year, it was found that ESG investment does not pursue ethical investment while pursuing ethical investment. It will definitely sacrifice financial returns, and its returns are more likely to be better than traditional investments. Among them, several ESG indexes of MSCI also significantly outperformed MSCI's own parent indexes.

Many people dismantle ESG (E environment, S society and G governance): environmental groups only care about E, people who care about society only care about S, regulators only see G, and many people generally misunderstand that companies engage in ESG It is just for applause, and does not provide any value creation for the company. ESG investment is actually more of a value orientation, but various studies have also pointed out that ESG is an irreversible trend in the capital market, which can bring real benefits to companies and investors. Advantage.

To make a long story short, the logic behind ESG is not complicated. The main reason is that these companies have already done a good job in risk management. When the crisis hits, they will naturally be able to come up with plans and responses earlier to handle the crisis better and reduce losses.

There are Harvard scholars in foreign countries who have studied the advantages of ESG. They have studied the data of more than 3,000 companies in the early stage of the Wuhan pneumonia outbreak, that is, from the end of February to the end of March 2020 (when the global financial market was collapsing). China is a more responsible company, and its share price has fallen less than the industry.

According to the data of the "Principles of Responsible Investment Initiative" (PRI), the total assets under management of the PRI have increased rapidly in recent years, reaching more than 100 trillion US dollars, and the number of institutions that have signed the PRI is also increasing, including Norway's sovereign wealth. Fund, Japanese Government Pension Fund, etc.

However, at present, there are not many ESG ETF products for direct investment in the retail market, and the scarcity is even greater in the Hong Kong capital market. Investors who intend to invest in ESG may only be able to directly look for related ETFs in US stocks for the time being.