Modern ESG investing has its roots in the 1970s with the rise of “socially responsible investing.” It was seen as a specialized investment strategy that offered a way to make a statement about values that mattered to you – but that typically didn’t offer competitive returns.
In 2000, the term ESG was first used as part of the United Nations Global Compact, which sought to encourage the integration of human rights, environmental and anti-corruption efforts into capital markets. The compact was widely adopted and resulted in new regulations by governments and agencies around the globe. At the same time, there was growing public concern about climate change and social issues. The combination of factors had helped drive tremendous growth in ESG investing.
Investments into ESG mutual funds and Exchange-Traded Funds totaled $355 billion in 2020. By the third quarter of 2021, it was estimated that inflows into these funds had already reached $577 billion, according to Barron’s.