Incorporating Environmental, Social, and Governance (ESG) trends into analysis processes forms part of the criteria for investors when identifying material risks and growth opportunities in companies they’re interested in. The ESG landscape is ever-changing as it responds to the constant demand created due to the activities of the corporate sector. Let’s take a look at some of the key ESG trends we can expect to see in 2023 and beyond.

The Road Toward Mandatory Sustainability Reporting

Mandatory sustainability reporting is being adopted by many countries worldwide, regulated by their governments and stock exchanges. Thanks to a call from the global community, the International Sustainability Standards Board (ISSB) was established to create standards that ensure reporting is accurate, reliable, comparable, and transparent.

After the G20 finance ministers met in Washington DC in mid-October 2022, officials are anticipating the release of the ISSB’s finalised standards relating to ‘globally consistent, comparable, and reliable climate-related financial disclosures’. These regulations are set to drive standardised reporting, thus helping to level the playing field when companies seek investment and predict ESG investing trends.

A clear ESG trend will be a drive for stronger regulation and scrutiny, partially due to the demands of customers and employees. This also stems from concerns that companies may be greenwashing and using their sustainability efforts to market their brands and appear to be more engaged in these issues than they actually are. Investors are also looking for more frequent updates and increased transparency from companies in using and sharing ESG metrics.

The latest data also shows that it’s not just the big players that are getting serious about sustainability reporting. Smaller companies and startups are also attempting to provide their investors with these types of reports. Some might assume that small-to-medium enterprises (SMEs) don’t have a significant impact on the climate crisis. However, SMEs form 90% of the world’s businesses, resulting in a large carbon footprint when their outputs are combined. Mandatory reporting in this sector must be a certainty if the powers are serious about effecting change.

Putting Net-Zero Plans into Action

Executing net-zero action plans will be one of the ESG Trends in the coming years.

Another ESG trend has been a greater focus on implementing net-zero plans which seek to reduce CO2 emissions to as close to zero as possible. More than one-third of the largest publicly traded companies in the world have already put net-zero targets in place. The driving forces of these plans are shareholders and stakeholders who rely on TCFD reports to show the viability of the business in different climate scenarios.

These plans could include building or refurbishing low-carbon buildings as campaigned by City Developments Limited (CDL), a global real estate company in Singapore. Or changing a fleet of over 2,500 cars to hybrid or electric models like Orange did, thus reducing their CO2 emissions by 34%.

Increased Focus on Social Risk Management and Diversity

As management teams try to mitigate unforeseen disruptions in performance and operations and deal with increased infrastructure costs due to inflation and the repercussions of the pandemic, the spotlight has been on the fragility of supply chains and the social issues that affect them. A recent analysis exhibited a 37% increase in social-related proposals by shareholders in the 2021 proxy season when compared to the previous year, and just 13% in environmental-related matters.

At present, companies are starting to make greater efforts to eradicate human rights infractions and improve labour conditions. It’s expected that social risk management and supply chain traceability will be at the forefront of proposed legislation in the coming years.

What to Expect in ESG Investing Trends

ESG investing is the practice of investing in companies with a positive ESG-related impact. Also known as socially responsible investing, ESG investing emphasises ethical participation in the market. It’s predicted that asset managers worldwide will increase their ESG assets under management from US$18.4 trillion in 2021 to US$33.9 trillion by 2026.

The fastest growth in assets under management is occurring in Asia Pacific, with a predicted rise to US$3.3 trillion in 2026 — more than triple what it currently is. It’s quickly outpacing the asset and wealth management market.

Another investment to keep an eye on is green bonds. These bonds work like regular bonds with the exception that any money raised is used in projects that have a positive impact on the environment, such as green buildings and renewable energy initiatives. The World Economic Forum predicted that annual issuance could exceed US$1 trillion by 2023, citing a Climate Bonds Initiative study.

Tackle ESG Trends With Convene ESG

Convene ESG to tackle ESG trends and reporting

Keeping up with ESG trends and attracting investors means putting stringent, transparent ESG measures in place. If you don’t know where to start or don’t have the infrastructure to research the way forward, turn to Convene ESG.

Our ESG reporting software will help you streamline your data-collection processes, provide advisory services on the best way to incorporate ESG compliance in your company, and show how you compare to competitors within the industry. The reports generated by Convene ESG are easy to understand and boardroom-ready. In turn, they provide full oversight of your ESG data.

Discover how Convene ESG optimises sustainability reporting, increases oversight, and saves resources. Learn more about how Convene ESG can help you take on ESG trends.