The number one myth people believe is that in order to invest alongside your values and make a positive impact, you have to give up returns. The reality is that, yes, you can decide to give up returns for impact. And that's called concessionary investing. It's something that a lot of foundations do. But giving up returns is definitely not just a given. In fact, the data shows that ESG strategies over the long term and perform just as well or better than traditional investing strategies.
ESG and impact investing has evolved from avoiding companies that do harm to actively including those that align with investor values, integrating ESG factors into the investment decision making process. Generally speaking, it's easier to implement socially responsible ESG and values-based investing through publicly traded stocks and bonds, alternatives, and investments in the private markets. Those are often the best options for making a direct positive impact through investing. It's more difficult to see that direct impact through publicly traded stocks and bonds. But in the private markets, there's a lot of opportunity to actually see how every single dollar you invest in these kinds of investments make a direct positive impact.
Myth two about ESG is that impact investing is just a fad.
At Ellevest, we believe that it's here to stay and it's quickly becoming mainstream. And in fact, ESG and impact investing is the future of investing. Over the past two years, more than $1 trillion has flowed into ESG funds. At the end of 2021, by some count, there was about 30 trillion in these kinds of assets. Bloomberg estimates that by 2025 ESG, assets will grow to $50 trillion, which is a fairly large number. Now, I believe that one of the primary drivers of why this is not a fad and continues to grow, is actually the great wealth transfer, you might have heard of that. That is the transfer of wealth that is already happening from Baby Boomers first to women, because generally women outlive their male spouses, and then to younger generations, millennials and younger. The studies show that women and millennials in particular are very interested in tailoring their investments to their values. So increasing demand by those who actually hold the capital that comes from the beneficiaries of the great wealth transfer will really continue to drive ESG and impact investing.
Myth three is that ESG and impact investing is driven by politics and harms investors.
The reality is that anti-ESG has become a very hot political potato. But in fact, ESG and impact investing are driven by economics, and they should be driven by economics. You know, as I mentioned earlier, ESG consideration of ESG factors is additive to the investment process; it's not instead of the investment process. Financials are important, but also important is how a company's financials can be impacted by environmental, social and governance issues because these play directly into a company's future profits, they're prospects, and I believe they really should not be ignored.
It's not really about being woke or not being woke, it's really about identifying and addressing real risks to economic growth and profitability that arise from ESG factors. The anti-ESG movement that you might have seen in the headlines, they've actually been found to be fairly costly to investors. Some states have adopted some anti-ESG legislation that prohibit those states from using asset managers who offer ESG strategies. In effect, they've limited the number of asset managers they can use. That means less competition. And that results in a higher cost of capital for investments that the states made, particularly in municipal bonds, for example.That's kind of what is behind some of these big numbers is that the interest that they have to pay or the cost of capital, cost of capital is much higher, because they basically eliminated using some or using all of the financial firms that they could could use.