Esg trends
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ESG and sustainability investing has become a major trend in the financial industry. Over $35 trillion is now invested according to sustainable investing strategies, representing one third of total assets under management globally. Major asset managers like BlackRock and banks like Nordea are increasingly integrating ESG factors into their investment decisions and excluding companies deemed unsustainable. Regulators are also supporting this shift through new rules requiring companies to report on their sustainability impacts and human rights due diligence practices.
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Esg trends
- 1. Financial Markets Indicators ESG and Sustainability as a major business trend According to Global Sustainable Investment Review report (published in July, 2021), sustainable & ESG investments have reached the point of $35.3 trillion of assets under management indicating that every third dollar is invested into sustainable assets. i BlackRock, the world's largest asset manager, has integrated ESG considerations into investment process and conducts sustainability due diligence of investment targets. Another major player, Nordea Bank Abp (which currently overseas around $425 billion) announced that it may exclude all investment not deemed sustainable in as little as half a decade. ii 117 of major international banks and financial institutions have already joined the Equator Principles – a framework for determining, assessing and managing ESG risks in finance & debt projects (incl. ESG due diligence). iii According to the survey of the World Federation of Exchanges (61 stock exchanges participated), 82% of the stock exchanges either encourage or require ESG disclosures. iv According to the Climate Bond initiative, the worldwide annual issue volume of green bonds has grown from less than 40 billion USD in 2014 to over $269.5 billion USD in 2020 worldwide. v
- 2. Regulatory Indicators ESG and Sustainability as a top business trend Rapid crystallization of international soft law frameworks (eg, UN Guiding Principles on Business and Human Rights) into hard law of many countries (in the form of mandatory due diligence and reporting laws). i The US SEC has recently announced the establishment of the Enforcement Task Force Focused on ESG and Climate Issues. Based on various media sources, the Commission intends to propose new corporate disclosures on ESG matters. ii In March 2021, the European Parliament adopted a resolution calling for mandatory human rights and ESG due diligence across the value chain for companies operating in the EU market. The European Commission has announced that it would soon submit a legislative proposal for the Directive. In addition, In April 2021, the European Commission adopted the EU Taxonomy Climate Delegated Act aimed to support sustainable investment as well as the proposal for a Corporate Sustainability Reporting Directive (CSRD), Companies are facing increasing demands from investors, proxy advisors and ratings firms for greater and more detailed disclosure on ESG topics. In 2019 – 90% of the S&P 500 published reports on sustainability. These calls for enhanced disclosures are driving a need for better governance structures, practices and policies. iii iv
Editor's Notes
- European Commission adopted … https://www.euractiv.com/section/energy-environment/news/lawmakers-call-for-green-due-diligence-in-europes-supply-chains/#europe (interesting what departments will be responsible for screening?) European Commissioner for Justice Didier Reynders has announced that the European Commission will introduce legislation in 2021 to make human rights due diligence mandatory for EU companies. With the huge experience on conducting due diligence lying within compliance departments, companies may decide to allocate this area of human rights & environmental due diligence to ethics & compliance teams.
- European Commission adopted … https://www.euractiv.com/section/energy-environment/news/lawmakers-call-for-green-due-diligence-in-europes-supply-chains/#europe (interesting what departments will be responsible for screening?)