Sustainable investment is a fast-rising trend but the picture is a complex one for IR teams to decipher thanks to the variety of investment approaches and focus areas in the market. IR Magazine and Bloomberg teamed up for a webinar to explore the state of sustainable investment today and how companies can best engage over ESG issues. Below are five takeaways.
1. Assets invested through an ESG lens continue to rise
‘We have seen a big increase in investors’ focus on ESG – the latest statistic to come from the US Forum for Sustainable and Responsible Investment is that 22 percent of assets under management in the US have sustainability,’ explained Gregory Elders, senior Bloomberg Intelligence ESG analyst. ‘What that actually means in practice is a different story. It ranges by company [and] by investors so it is really important for companies to understand what the issues are in their sector and how they can respond to investor needs.’
2. Trump election could stall new ESG rules
‘With the election of Donald Trump, I think it is fair to say that issues around more regulations [and] more reporting might be on the backburner,’ said Elders. Referring to a call in the US for mandated disclosure of ESG risks, he said: ‘I think it wasn’t very clear what would happen before, and I think it’s less clear or certain to happen now. The flipside is that investors are still going to be filing proxy resolutions pushing this, so if you don’t necessarily see requirements at the SEC, you are still going to see investors asking for this information.’
3. Companies have improved disclosure, but more work is needed
There is a ‘growing trend toward increased disclosure’ and investors can have more confidence in sustainability information thanks to verification services, said Manjit Jus, head of sustainability application & operations at RobecoSAM. But he added: ‘I still think, looking at it from our point of view, from an investor’s perspective, companies need to do a better job of integrating sustainability information into the overall business story they are telling.’
4. No news can be good news
During the webinar, an audience member sent in a question asking whether he should be worried about a fall in interest in governance roadshows and meetings. Not necessarily, said Jus: ‘I would hope that if there is a decrease in overall requests, it is not because of a decline in interest but [rather] just a company [being] more transparent in the way it is reporting. [If] it is more forthcoming about a lot of these issues, there is no need to have all these separate meetings.’
5. Climate change and diversity high on investor priorities
The webinar ended with the panel being asked about key ESG issues that will grow in importance. ‘I think there has clearly been a lot of momentum over the issue of climate change,’ said Elders. ‘I think that is firmly on the agenda, in particular with countries like China. There are implications across the board in terms of energy, demand, supply, electric vehicles and metals; what does that mean for copper or platinum? I think a range of issues are impacted across that.’ Elders also picked out diversity, pointing to pressure in both Europe and the US. Investors and governments will be focusing on whether you have ‘the right diversity and experience on your board to lead your company,’ he concluded.
