This year will see the financial services industry stops “playing” at ESG and start doing it properly, according to a senior figure at River & Mercantile.
Portfolios will no longer profess to be green simply because they have low carbon emissions or because a third party data provider labels them AAA, said James Sym, head of European equities at the firm.
Instead, companies will start seriously thinking about how to allocate capital to businesses which are going to support low carbon emission activities, which is the only way targets limiting global warming will be met.
Capital allocators have ample opportunity to make a real difference in the decarbonisation space, whether it be in transport, steel or cement production.
However, according to a survey released last month by Nuveen, investors focused on ESG factors said seeing the benefits of their investments at work is essential to their participation.
As many as 91% of respondent investors agreed that seeing the specific societal or environmental benefits of their ESG investing was critical.
But 53% of ESG investors said it was hard for them to see those results, and 95% of those investors said they would invest more if it were easier to.
Meanwhile The Financial Stability Oversight Council (FSOC) recently released a report identifying climate-related financial risks as a top priority.
“The Council recognizes the critical importance of taking prompt action to improve the availability of data and measurement tools, enhance assessments of climate-related financial risks and vulnerabilities, and incorporate climate-related risks into risk management practices and supervisory expectations for regulated entities,” FSOC stated in the report.
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