Tom Tynan Head of Institutional Group
Dr. Dorothy Maxwell FICRS Head of Sustainability and ESG Advisory
Brian Kennedy, CFA Fund Manager
Sustainability 2021- An investors perspective.
01st February, 2021
While the sustainability landscape in early 2020 was initially framed by the urgency of the global environmental crisis, the COVID-19 pandemic has subsequently played a defining role in expediting and broadening the Environmental , Social and Governance (ESG) lens. It laid bare the fragility of our markets as those at the margins of society were exposed quickest and spotlighted a broader range of issues from income inequality, diversity and inclusion to social injustice and employee welfare. Investors have concluded that they can no longer look the other way and are ready to address these ESG issues within their portfolios. The sustainability ‘asks’ on business are growing in complexity and are challenging to navigate. There is an alphabet soup of acronyms, initiatives, shifting goal posts and benchmarks to achieve. But this significant growth in sustainably aligned capital is also providing more favorable funding terms and a wider breadth of shareholders for those than can credibly articulate their sustainable purpose.
Shareholders- investors are driving the ESG agenda, aided by regulators, customers, employees and society at large.
Acceleration- ESG investment looks set to grow to more than half of global assets under management (AUM).
Acceptance- ESG is now seen as a core license to operate as part of an investor's fiduciary duty.
Purpose- investors want to see a 'purpose-led' business with a holistic and credible approach to managing their material ESG risks and opportunities.
Transparency- disclosure to gold standard industry benchmarks is becoming the norm at corporate and supply chain level.
Stewardship- stewardship is driving a dramatic rise in ESG disclosure and engagement requirements to maximise transparency on sustainability performance.
Governance- accountability at Board Level with clear KPIs linked to remuneration differentiate best in class.
Sustainability in business means ensuring the company's activities, products and services have a positive versus negative impact on the environment and society. It requires reconciling environmental, social and economic prosperity. At a minimum, the material environmental and social impacts of the business must be managed in line with the latest law, science and best practice.
ESG refers to the three Environmental, Social and Governance factors in measuring the sustainability impact of an investment in a company. These criteria help to determine the future financial performance in terms of return and risk.
Five Key Takeaways
The key takeaways for business on sustainability and ESG for 2021 include:
- Stakeholders are increasingly holding companies to a higher standard of governance, demanding that they demonstrate a real commitment to being part of the solution, and not the problem, across a broader range of environmental and social issues.
- Strong sustainability performance across ESG is essential to managing both the risks and opportunities of the current landscape.
- With the rapid expansion of dedicated in-house ESG teams, the demand for transparency and disclosure looks set to increase dramatically across a broader set of metrics in parallel with increased direct engagement.
- Investors increasingly expect to see evidence of credible, continuous improvement across material environmental and social criteria aligned to law, the latest science, standards and disclosure benchmarks.
- Expectations to meet and exceed best practice from customers, employees, beneficiaries, governments and wider society across social issues have only increased.
Download the full whitepaper to gain insight on the sustainability and ESG key trends that organisations need to know to meet increased shareholder and wider stakeholder expectations.
