Adapting to the Shifting ESG Landscape

Three key takeaways:

1.  Materiality. Materiality. Materiality. Investors are focused on business materiality – both from a risk and opportunity lens. According to our research, when asked which was more important as part of investment decision making, more investors, 44%, said “both are equally important”.
2. Sustainability and ESG Remain Intact and Important: Recognizing the ESG backlash that is dominating headlines, sustainability remains a critical focus for investors and corporates. According to our Survey, 90% of investors place at least some importance on ESG when making investment decisions, the highest level ever recorded, while 62% of surveyed corporates indicate incorporating sustainability / ESG into business strategy is very important to critical to their company’s long-term success. Notably, 60%+ of surveyed asset managers have established divisions focused on evaluating a company’s ESG approach while 72% of corporates report they have instituted an internal ESG committee.
3. Consistent and Meaningful Engagement is Key: Stakeholder engagement is a critical component of education and owning your ESG narrative. Don’t wait for third parties (e.g., ratings agencies, proxy advisory firms, etc.) to tell your story for you. Be proactive about getting in front of key stakeholders as these conversations will identify new topics of interest and may change the importance of existing ones. Investors, specifically, are seeking progress not perfection and with it, authentic communication with updates coming from issuers directly. In our Survey, 29% said that “ESG is a factor in alpha”, up from just 8% in 2021. If investors don’t know or appreciate what you’re doing, value cannot be ascribed.