NEWS & VIEWS
As a result of the extraordinary momentum for ESG in the market and government policy during 2021, investors, corporations and world leaders have raised hopes for meaningful progress on climate pledges in 2022. In addition to environmental concerns, social issues appear poised to move into the spotlight as their significance is being recognized in ESG discussions. In this article we will discuss key ESG trends to watch for in 2022.
More expectations on social issues in supply chains: The private sector is under enormous pressure from governments and investors to provide clarity on its social impacts in its operations, procurements and supply chain. This has been evidenced in an increase in legislation across Europe and the US restricting imports based on forced labour in supply chains. Consequently, experts predict that social issues in supply chains will earn more attention, especially as efforts grow to improve labour conditions and curb human rights abuses.
Increase in divestment: 2021 saw record numbers of investors and banks implement negative screening strategies, particularly to the fossil fuels industry and other high carbon intensity companies. In 2022, experts anticipate that negative screening strategies will be more prevalent, in order to decarbonize investment portfolios. However, many believe this strategy has its downsides, as it does not encourage change.
Increase in ESG regulation: Experts predict that we will see an avalanche of new regulation, particularly in the APAC region and in the US, as governments seek to align themselves with market trends coming out of Europe. Ultimately, this will lead to a consensus on ESG definitions and classifications. This will hopefully lead to the reduction of greenwashing, which will benefit investors through better choice and clarity.
Companies will be expected to turn pledges into action: In 2021, we saw record numbers of governments and organisations pledge to reach net-zero emissions by 2050. However, these commitments often lacked short-term reduction targets. Therefore, experts believe that in 2022, pressure will mount from investors and other stakeholders to develop immediate concrete targets to address emissions across the full value chain.
As we head into 2022, the prominence of ESG in investment markets doesn’t look like a trend that will fade but will instead continue to accelerate and play a significant part in shaping our post-pandemic future.