Sustainability and Investor relations - Five Key Takeaways

26th May, 2021

Horizons Senior Sustainability Director, Dr Dorothy Maxwell, joined edie’s Sustainable Business Covered Podcast, to discuss the latest trends and legal requirements facing the PLC Investor Relations teams. Listen to the clip here and read our key takeaways below.

Commercial Rationale

Outside of the moral imperative - the commercial rationale for the fund management industry is clear: ESG funds have attracted about $350billion AUM globally over the past two years. To put that in perspective, that growth trajectory is double the rate of growth of any other funds. In Europe specifically, funds adhering to an ESG label constituting will constitute the majority of assets under management within the next 4 years.

Investors have taken the baton from the regulators

More than a third of total assets under management worldwide are now under committed to the Net Zero Asset Managers initiative aligning their investment net zero emissions by 2050 or sooner. This commitment is already impacting their individual stock selection criteria.

Stewardship & ESG

The combination of asset managers’ Stewardship and Sustainability teams is clear evidence that they are prepared to wield their voting rights in a sustainable manner. The demand for transparency and disclosure look set to increase dramatically across a broader set of metrics in parallel with increased direct engagement. We are seeing 3rd party rating tools like MSCI and Sustainalytics being increasingly augmented by proprietary tools and teams.

Stranded Stock Scenario

With the rise of the ESG savvy consumer and tighter ESG fund selection criteria driven by regulation like the EU SFDR, the risk of individual stock becoming stranded is increasing. If a business company cannot meet these heightened non-financial disclosures and engagement requirements, there is a risk that their stock will be either excluded from existing portfolio or not considered for new portfolio admissions.

Credibility is Key

Develop a holistic credible sustainability program aligned with 3rd party verified best practice standards that manage your material risks and opportunities. Remember shareholders are just one stakeholder, do not use a 'cookie cutter' approach just to placate investors and game ratings. Define your business purpose and own your narrative aligned to what you do, impacts on the world and what all your stakeholders require – employees, customers and investors and society as a whole etc.

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