ESG investing has seen some headwinds in 2022. The ESG indexes suffered in 2022 in part due to their low representation in areas of the market that have benefitted from higher energy costs, such as the oil and gas sectors, and high representation in growth sectors that have been challenged by rising rates.
However, the energy crisis has intensified the pressure to deliver on the energy transition while higher bills are fuelling the cost of living crisis and drawing attention to social issues. Hence, we expect that ESG investing will continue to gain traction over the medium and long term, but we also believe the main lesson from 2022 is that the traditional exclusion or positive screening only approaches are not sufficient anymore in a world where geopolitical risks, regulation, inflation and economic uncertainty are generating a higher dispersion in returns. This market environment requires a greater focus on stock selection.
You can now read the full whitepaper at the link below