One of the fund managers we use within our client portfolios, Betashares, recently shared an interesting perspective on how global geopolitical events are reshaping ethical investing, in particular Environmental, Social and Governance (ESG) risks. Their article highlights how factors such as energy security, supply chain resilience and geopolitical risk are becoming increasingly important considerations alongside traditional factors.
For many years, fund managers and other investors have focused on companies’ ESG approaches, and how these might result in increased risk. Investors have looked closely at how companies manage issues such as climate change, labour practices, corporate governance and ethical conduct.
While these factors remain as important as ever, the world is changing.
Recent years have seen heightened geopolitical tensions, trade disputes, supply chain disruptions and growing concerns about energy security. As a result, responsible investors are increasingly considering not only how companies operate, but also how resilient they are in an increasingly complex and uncertain global environment.
Beyond traditional ESG
Historically, ESG analysis has focused on assessing company behaviour. Today, investors are also evaluating how businesses respond to challenges such as:
- Energy security and the transition to renewable energy
- Supply chain resilience and access to critical resources
- Geopolitical risks that may affect operations, customers or suppliers
These factors can have a significant impact on long-term investment outcomes and are becoming increasingly relevant to responsible investment decision-making.
Energy transition and resilience
The transition to a lower-carbon economy remains a key objective for responsible investors. However, recent disruptions to global energy markets have highlighted the importance of ensuring that energy systems are not only sustainable but also reliable and secure.
This has led governments and businesses around the world to increase investment in renewable energy infrastructure, battery storage, electricity networks and critical minerals needed for the energy transition.
Supply chains matter more than ever
The clean energy transition depends on access to resources such as lithium, cobalt and rare earth minerals. Many of these supply chains are concentrated in specific regions, creating potential vulnerabilities if geopolitical tensions or trade restrictions arise.
As a result, investors are paying closer attention to whether companies have diversified and resilient supply chains, as well as looking at traditional ESG considerations such as environmental and labour standards.
A broader view of investing responsibly
Ethical investing continues to evolve. Considering environmental, social and governance factors is still a core requirement, but understanding broader risks and opportunities is also important.
The ability of businesses to adapt to changing political, economic and environmental conditions is increasingly becoming part of the conversation around long-term sustainability and investment resilience.
This blog is a summary of an article issued by Betashares Capital NZ Limited (NZBN 9429050650392; FSP 1003610) (Betashares). Betashares is the manager of the Betashares Investment Funds Scheme and is one of the fund managers featured in our client portfolios. If you’d like to explore the topic in more detail, including the role of energy security, resilient supply chains and geopolitical risk in responsible investing, you can read the full article here:
How Geopolitics is Rewriting Responsible Investment [betashares.com.au]