Joe Biden’s predicted regulatory changes will drive environmental, social and governance (ESG) investing to become the ultimate megatrend.
As the U.S. President selects Gary Gensler to head the Securities and Exchange Commission (SEC), we will likely see Joe Biden’s administration moving into an era of responsible and sustainable investing.
As well as the tougher approach to the use of fossil fuels and Biden’s promise to act fast to tackle the climate emergency, Gensler will also likely make heavy reforms and widen ESG investing and corporate disclosure rules in the U.S.
Indeed, it can be assumed that Gensler would have the major support on the Commission.
Whilst in her role as acting SEC chair, Allison Herren Lee said that during her time as a Commissioner, “I have focused on climate and sustainability, and those issues will continue to be a priority for me.”
In The New York Times she wrote: “Both investors and the broader public need clear information about how businesses are contributing to greenhouse gas emissions, and how they are managing — or not managing — climate risks internally. Realistically, that can happen only through mandatory public disclosure.”
If the SEC boosts green investment regulations, as predicted, it will narrow the transatlantic gap that has come about over the past few years as European watchdogs proceeded with stricter ESG investing and disclosure regulations.
At the beginning of last year, I defined ESG investing as a ‘megatrend’ of the decade. Indeed, during the year inflow doubled and ESG funds out-performed the market.
However, the ‘megatrend’ definition now appears something of an understatement should the U.S. move towards ESG-related regulatory reforms and comes into line with Europe.
If this happens, responsible investing will become the ultimate investment megatrend.
The potential changes to the regulations in the U.S. on ESG investing and corporate disclosures are not as yet heavily priced-in to markets.
As such, investors should closely monitor this area and make the most of the opportunities.
Nigel Green is CEO and founder of deVere Group, one of the world’s largest independent financial advisory and fintech organisations.