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HSBC ESG Sentiment Survey – Blurry signals
- In our seventh ESG survey, we find global events continue to distract from long-term sustainability challenges
- The march towards uniform global ESG standards faces the challenge of allowing for flexibility at a local level
- As ESG evolves, there are signs that integrity will emerge as a critical point for investors and businesses alike
We are always being asked what investors are thinking and doing when it comes to environmental, social and governance (ESG) investing. So, in 2022, we launched a regular ESG survey.
Our seventh edition – planned before the French and UK elections were announced – captures the views of 165 respondents from 150 institutions representing USD6.7trn in assets under management (AUM). So what’s on their mind?
Blurry signals: For those where ESG was not an integral part of their investment process, momentum has been lost. But for those where ESG is an important framework, the refinement process is now well underway.
Regional perspectives matter: In Asia, investors believed that they were the main driver of sustainability compared to governments and businesses in other regions. Also, many respondents struggled with a fully global unified approach to ESG, whereas there is still strong support for more flexibility in disclosures and for global standards to be able to account of local circumstances.
Engagement is hard work: With potential revisions to stewardship codes, we were surprised that the majority of respondents do not conduct any corporate engagement on sustainability issues. For those that do, there is a good range of engagement approaches.
Social issues are challenging: Just under three-tenths do not consider social issues explicitly. That leaves a majority of respondents who look at social issues that affect investments from different angles. For instance, some consider it on a global basis uniformly, others on a regional or country basis.
Qualitative versus quantitative: Water and biodiversity remain the top environmental issues requiring more attention; civil and economic issues remain the top social issues deserving more time, although workplace practices have risen as supply chains have fallen as a priority; for governance, it is still qualitative issues like board effectiveness that require a closer look.
A thematic compromise: With fewer in the US explicitly talking about ESG, we see the rise of thematic investing as a compromise. This comes as scoring and ratings fall slightly as an ESG approach as does integration and engagement, with a marginal increase for screening.
Integrity is key: As the regulatory ecosystem for ESG continually evolves, investors felt that corporates were the part that needed most oversight, but it was in the area of sustainability integrity rather than better disclosures. Service providers were next – in the area of more consistency, with investors rating themselves third in terms of requiring more oversight.
Time is an issue: It has and will be an interesting year when it comes to world events and sustainability issues may struggle to compete for attention. Out of the four major sustainability events in the final quarter of this year, it will be climate COP29 (11-22 November) that will likely garner most attention.
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