May 2021
MAI NSTRE ET PARTN E RS
DOES THE ‘S’ IN ESG HAVE
‘MIDDLE CHILD’ SYNDROME?
Long overlooked in favour of its more obvious counterparts, last year saw investors turn a corner and beckon in ‘an era of social impact investing’, says MainStreet Partners’ Managing Director, Simone Gallo
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f 2020 was the year ESG went mainstream, it could also be viewed as the year businesses came under unprecedented scrutiny for their social practices.
In Europe, over half of new fund flows last year went into ESG products. Total fund flows in 2020 hit €574.3bn – the second highest amount in the industry’s history – of which ESG products accounted for 50.46% (€289.7bn). 1
Yet for an abbreviation growing more ubiquitous by the day, the ‘S’ (or social) element of ESG investing has been stubbornly difficult to understand and historically challenging to get the measure of. In this respect, it has been much like the fabled middle child – “excluded, ignored and often outright neglected”2 – largely skimmed over in favour of its environmental or governance siblings. Until last year that is. As with much of 2020’s contemplation of the previously underappreciated, the catalyst was the Covid-19 pandemic. Suddenly in plain sight the true chasm between the haves and have nots; the questionable treatment and remuneration of people in key worker roles; the shortcuts certain companies seemed willing to
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take to protect their bottom line; and in some instances, the lack of provision of basic human rights. Finally, questions were being asked about big business’ ‘licence to operate’: Were they contributing positively to society? Was it right for profit to be prized above all else?
The ‘S’ (or social) element of ESG investing has been stubbornly difficult to understand and historically challenging to get the measure of
IT’S A PEOPLE BUSINESS Answers have not always been forthcoming. Part of the reason for this is the intangibility of what defines ‘social’ in the context of analysing the ESG credentials of a company. Broadly, we are talking about the impact a business has on people. Those inside its organisation and those outside
I FAmagazine.com
