Skip to content

2 June, 2023

Subscribe Advertise About Us
  • My Account
  • Register
  • Log In
  • Log Out

Board Agenda

  • Governance
  • Strategy
  • Risk
  • Ethics
  • News
    • Categories

      • View All
      • Board Moves
    • Succession planning

      News round-up: this week in governance

      UK 'less optimistic' on ESG than European boards; holding stock; ethics codes; governance in Japan;...

    • C-suite barometer Leaders are positive about growth despite economic uncertainty

      Sustainability and technology are strategic priorities for boards in 2023, Mazars’ annual barometer of the...

    • EU CSDDD Pressure builds on EU to amend due diligence rules

      More companies have added their voices to the call to make the EU Corporate Sustainability...

  • Insight
    • Categories

      • View all
      • Governance
      • Strategy
      • Risk
      • Ethics
      • Board Expertise
      • finance
      • Technology
    • Climate finance

      How climate change alters the financial landscape

      To achieve sustainability, companies and boards will need to look not only to their operations,...

    • generative AI

      Five AI issues to consider right now

      We may not know what AI will mean for us all in the long term,...

    • sexual misconduct

      How to prevent sexual misconduct in your organisation

      Revelations about the CBI may be shocking, but there is no place for complacency and...

  • Comment
      • View all
    • hybrid AGM

      Hybrid AGMs maximise shareholder participation

      Avoid virtual-only annual general meetings: although pragmatic in an emergency, they water down shareholders’ rights.

    • ESG break up ESG: Should E and S break up with G?

      In the world of investing, maturity has revealed significant practical shortcomings in combining environmental, social...

    • controlling shareholders The politics and geopolitics of controlling shareholders

      Shareholders with a controlling interest influence not only financial matters but can also wield great...

  • Interviews
      • View All Interviews
      • Podcasts
      • Webinars
    • information resilience IT transformation sees boards moving to ‘continuous’ management

      Data analytics available on demand requires a resilient—and selective—approach to sharing information, a webinar panel...

    • life sciences podcast Reform of NHS levy ‘harms UK competitiveness’

      Boards in the pharmaceutical and life sciences sector face increasingly difficult decisions, according to a...

    • Board priorities 2023 Board priorities 2023: tact, trust and transparency

      We asked key figures what would help boards this year. The answers ranged from 'smarter...

  • Careers
      • View all
      • Selection
      • Board Moves
    • board survey 2023 Board appointments fell sharply in 2022

      Companies appear to be sticking with experienced leaders—to the detriment of progress—suggests FTSE 350 boardroom...

    • diversity statistics Diversity statistics challenged by new scorecard

      Companies can ‘hit the target, but miss the point’, say academics researching a more ‘holistic’...

    • CEO turnover CEO turnover rises steeply

      The researchers say political changes and business difficulties may have accelerated turnover, which has risen...

  • Resource Centre
      • White Paper Downloads
      • Book Reviews
      • Corporate & Advisory Services
    • Mazars c-suite 2023

      Mazars C-suite barometer 2023

      The Mazars C-suite barometer is based on responses from more than 800 C-suite executives from...

    • CFO Career Survey Report

      Our survey, in December 2022, of almost 200 CFOs across the public, private and non-profit...

    • The Engagement Appeal: The Path to Inclusive Investor Engagement

      The Engagement Appeal: The Path to Inclusive Investor Engagement

      The Path to Inclusive Investor Engagement highlights the need for greater engagement between companies and...

  • Events
  • Search by topic
    • Governance
    • Strategy
    • Risk
    • Ethics
    • Regulation
    • ESG
    • Investor Relations
    • Selection
    • Board Expertise
    • finance
    • Technology

Better data and consolidated standards needed to drive ESG investing

by Gavin Hinks on October 11, 2019

Speakers at the Global Invest Forum discussed the difficulty of integrating ESG into investment decisions without clear data or definitions of sustainability.

smoke from coal-powered plant stacks

Image: Calin Tatu/Shutterstock

When investors and their advisers gather there is a single recurring theme that arises again and again: environmental, social and governance (ESG) investing.

So it was in Paris this week as the great and the good of European fund management and asset owners gathered for the Global Invest Forum, the industry’s annual get together to share and debate the biggest issues affecting what they do with billions in savers’ hard-earned money.

On day one ESG investing, along with its closely related cousin impact investing, emerged repeatedly—even in sessions designed to tackle other issues.

With pressure from politicians, regulators and law makers on companies to help drastically cut carbon emissions, investment has become an important channel through which to influence the main producers of greenhouse gases.

But the topics under discussion offered a direct clue to the direction in which companies will find themselves shepherded over the coming years if the Paris Agreement—restricting global warming to 1.5 degrees, certainly no more than two degrees, above pre-industrial levels—is to be met. Those topics: data, standards and greenwashing.

Data for ESG investing

The difficulties involved in integrating ESG into investment decisions emerged as immense. This was illustrated by one chief investment officer who said that of the €16bn under management, 5% was in green investment, a further 2% had just been disinvested from fossil fuel. That left 93% “we have to shift”. Another pension fund officer, when asked if his fund had any assets in nuclear energy, confessed he did not know. A lot of work still to do there then.

What most asset managers and owners asked for is more data. As one investor said: “We need more data to find out where we have to shift.”

Companies might believe they are already producing more data than any busy fund manager could possibly need but there are clearly discrepancies. This were illustrated by Huub van Der Riet, portfolio manager, impact investing with NN Investment Partners in the Netherlands. “Companies that are big in scale have big departments that have the ability to deliver the analysis,” he said. “Smaller companies don’t have the ability to do that kind of reporting.”

This is important because regulators increasingly seek ways of pushing companies to be more transparent about their activities.

The EU has been pushing this strategy for some time now with non-financial reporting. That said, there is now a parallel push to aid investors. This has merged through the European Commission’s Technical Expert Group (TEG) which is producing advice on sustainable finance. The main work of the TEG has been the production of a taxonomy—a classification system, or screening criteria—that enables investors to identify “sustainable activities”.

The taxonomy elicits a mixed reaction. Will Martindale, director of policy and research at campaign group Principles for Responsible Investment, believes it is a welcome addition to the investment landscape even though it is “complex, but designed to deal with complexity”.

Others worry that the taxonomy could be too “strict” and therefore inhibit green investment.

Anxieties elsewhere focus on the proliferation of standards in the area of sustainable finance, including the EU’s green bonds, a standard intended for use in judging the sustainability qualities of a bond issue. Florence Saliba, vice-president of financing and treasury at Danone, the French food giant, said in a plea for consolidation: “Too many standards can lead to a lack of clarity.”

Diverging attitudes

Investors clearly worry about definitions of sustainability. This was brought home by pointing out the diverging attitudes towards nuclear power, even among neighbouring countries: France views it as sustainable; Germany, famously, does not.

There are also more complex tensions to work out. Another investor pointed to BAT, the cigarette maker. The company might score well on an ESG index because of its sustainability policies, but do poorly when viewed in the light of impact investing criteria because “cigarettes are bad for you”.  That may seem like stating the obvious, but sometimes the obvious can prove slippery to address in policy.

The difference here is brought home by a stark difference in emphasis: ESG measures tend to focus on “inputs”; impact investing has an eye on the “outputs”, or outcomes.

There was also much talk of “greenwashing”—claiming sustainability credentials that are not borne out in practice—whether it be companies or in investment products.

There was some scepticism that the situation is as bad as media reports might suggest, but Will Martindale offered a sobering thought on the investment industry.

“What we are seeing now is that investors are calling themselves ESG and selling products with that label. Regulators are not well set up to oversee that,” he said.

ESG engagement

Though rule makers clearly want investors to place pressure on companies, it may not always be that effective. Emmanuel Parmentier of INDEFI, a consultant to investment firms, revealed research that investors were fifth in the line of biggest influences on boards behind clients, first, then NGOs, employees and regulators.

Investors’ top engagement concern is also governance, with ESG and climate a close-run second. There are big variations across Europe in the use of engagement as a tool for ESG integration. INDEFI research reveals it at 100% of those surveyed in the Netherlands, while in the UK the figure is 71% and in Germany just 33%.

In an interview with Board Agenda before the conference, Will Martindale warned that despite the Paris target of 1.5 degrees, capital markets are currently funding 3.5, sometimes four, degrees of warming. “We haven’t yet seen the transition necessary,” he said.

However, the Global Invest Forum at least revealed asset owners and managers grappling with the issue, wrestling with the definitions and many leading the way on integrating sustainability policies. They may not be the biggest influence on boards: clients take that honour. Nevertheless, there is much more investor activity on ESG to come. Corporate boards should take note.

  • Facebook
  • Twitter
  • Google+
  • LinkedIn
  • Mail

Related Posts

  • Audit committees and ESG: ‘It’s a difficult journey to navigate’
    February 18, 2022
    CACID discussion on audit committees and ESG

    The rise of ESG as an investor concern is creating new demands of audit committees. A recent CACID event looked at the challenges.

  • Directors need to ‘up their game’ on ESG strategy
    April 4, 2022
    Board members looking at corporate reports

    Study says 70% of board directors say they are “not at all” or only “moderately“ effective at integrating ESG concerns into company strategy.

  • Investment managers hesitant to embrace ethics as part of ESG
    March 21, 2022
    Business ethics on cogs

    Study finds investors shy away from direct talk of ethics, but some are assessing company culture as an indicator of ESG performance.

  • Good ESG ratings make firms more attractive to long-term investors
    November 29, 2021
    Five glowing stars

    Study shows that companies with verified ESG ratings attract "financially sophisticated" investors with "long-term orientation”.

For thoughtful journalism, expert insights on corporate governance and an extensive library of reports, guides and tools to help boards and directors navigate the complexities of their roles, subscribe to Board Agenda

climate change, ESG, Global Invest Forum, impact investing, non-financial reporting, sustainability, Sustainable finance

Search


Sign up to our Newsletter

Receive independent news, thoughtful journalism & expert insights about leadership, corporate governance & key boardroom issues straight to your inbox every week.

SIGN UP

Follow Us

 

 

 

 

Most Popular

  • Corporate governance code review boosts internal controls
  • ESG: Should E and S break up with G?
  • Five AI issues to consider right now
  • News round-up: this week in governance
  • Board appointments fell sharply in 2022

Featured Partner Profile

Diligent

Diligent

Diligent Corporation, which was founded in 2001, is headquartered in New York, NY with a European HQ in London. Diligent’s modern governance platform empowers leaders and teams at every level of the organisation to digitally transform and create ...

Featured Partner Resources

The Engagement Appeal: The Path to Inclusive Investor Engagement

The Engagement Appeal: The Path to Inclusive Investor Engagement

This is the inaugural white paper from The Engagem...

Stakeholder Engagement: A Roadmap for UK Plc Boards

This guide aims to provide directors and their col...

Digital Boards: How Technology Adoption is Driving Culture Change and Resiliency

Digital tools proved their worth to boards during ...
Leadership in AI report

Leadership in AI

This report from Board Agenda and Mazars, in assoc...
Director's Guide to Internal Investigations

A Director's Guide to Conducting Internal Investigations

An internal investigation must be handled meticulo...
 

ADVERTISE – FREE CORPORATE LISTING

FREE - Add your company profile to our Corporate & Advisory Directory.
ADD

ADVERTISE – PROMOTE YOUR REPORTS & WHITEPAPERS

FREE - Add your company profile to our Corporate & Advisory Directory.
Add Resource

Register Free

Register to receive free article views, selected resource downloads, and all the latest news alerts straight to your inbox. Register


  • Editors & Contributors
  • Editorial Advisory Board
  • Corporate & Advisory Services
  • Media Marketing Solutions
  • Contact Us
  • Careers
  • Board Director Network
  • Terms & Conditions
  • Privacy Policy
  • Cookies
  • Sitemap
|