Three Ways the Biden Administration Will Boost ESG Investing

Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.

The transition of power from one presidential administration to another typically involves bold agenda-setting changes, as the incoming president looks to set the tone for the term ahead. The Biden administration is no different in this regard and, to the relief of many, has made clear that climate change is high on the agenda. Within the first couple of days of assuming office, the new president signed various executive orders that, among other things, brought the United States back into the Paris Climate Accord and revoked a permit for development of the controversial Keystone XL oil pipeline.

For sustainable investors, this clear prioritization of environmental issues represents a welcome change from the previous administration. The COVID-19 pandemic, combined with a spate of devastating climate-related events and high-profile injustices, has only underscored the importance of corporate behaviors around deforestation, supply chain management, worker treatment, health and wellness, diversity and inclusion, and more. Accordingly, the asset management industry saw record inflows to environmental, social and governance (ESG) strategies in 2020, with financial advisors and their clients increasingly recognizing the potential for their investments to drive meaningful impact and generate returns.

The Biden administration’s efforts to tackle the COVID-19 pandemic, promote racial equity, and address climate change may well continue this momentum, creating powerful incentives for companies to do the right thing by the environment and their stakeholders – all while boosting the prospects of those that are already prioritizing these concerns.

Here are a few ways in which the new presidency stands to bolster the adoption of sustainable investing: