This article talks about the following five trends to follow this year in the ESG space:
- The Regulatory Tsunami Looks to Hit Shore – As we have reported, the increase in government regulations will start to have a bigger impact on the business community in 2023. Key point – This is just ESG. This is not all-inclusive. This does not include carbon emissions or sustainability. As reported, these laws can domino, with one influencing another.
- U.S. Politics Heat Up – As we have reported, there a huge gap between the operational benefit of ESG at the company level; versus the financial investment market’s attempt to use ESG as a new shinny toy for investors without fully understanding how to define and verify ESG in the companies they include in their ESG funds. Key point – ESG standards and reporting will improve at the operational level; while, short term, given the anti-ESG political movement, most companies will down-play their ESG programs until the smoke clears.
- ESG Data Evolves – The combination of the above two trends leads to this point, which is that stronger ESG-evaluating tools are emerging, to improve accuracy. Key point – The need for accurate ESG data will increase and tools to provide said accuracy will also continue to evolve.
- Growing ESG-Related Allegations and Claims – There will be more claims of misrepresentation and wrongdoing, and more litigation on same. Key point – The easy days of Greenwashing are nearing an end as the need to support your claims with a globally-accepted 3rd party certification/validation/oversight are upon us.
- Proxy Season Brings Issues into Focus – Many of the shareholder proxy votes focus on ESG topics. Large investors use proxy votes to impact corporate direction on environment and social efforts. Key point – Environmental and social issues will be subjected to greater scrutiny and will receive stricter and more specific voting to hold companies accountable.