The coronavirus 'white swan': Companies and investors ramping up sustainability commitments
The coronavirus pandemic is acting as a "white swan" moment that is accelerating corporate focus on long-term sustainability strategies, but better disclosure and communication is needed for investors to unlock new finance to spur the green transition.
That is one of the major takeaways of a new global survey commissioned by banking giant ING. The survey consists of 450 corporate respondents and 100 institutional investors and examined attitudes towards long-term sustainability and environmental, social and governance (ESG).
The survey found that Covid-19 was acting as a white swan that had accelerated how committed corporates were to the green agenda. In total, 57% of the companies surveyed confirmed plans to accelerate new sustainability plans, while 62% were planning on linking executive pay to environmental targets this year. Currently, less than 10% of the surveyed companies have linked executive compensation to ESG targets.
The survey also found that investors are ramping up efforts to screen current portfolios against climate-related risks. Of the investors surveyed, 74% have increased commitments to align portfolios with the Paris Agreement, and 72% were placing more focus on ESG investing.
The social aspect of ESG is expected to rise in prominence in both the corporate and financial spheres. Employee health and wellbeing was listed by 33% of corporates as the top priority over the coming year, ahead of emissions reductions at 30%. Investors also listed social sustainability as one of their top priorities, behind only climate change and supply chain resiliency.
Over the next 12 months, 80% of the surveyed companies expect governments to introduce new policies that will force them to focus on improving social aspects of the value chain, such as access to healthcare. Additionally, 50% of corporates are likely to introduce social bonds.
Further findings suggest that many businesses have already embedded sustainability into corporate strategies. Around three-quarters of businesses that issued new green bonds claim that it has improved corporate abilities to progress against strategies, while 62% claim that ESG is strongly integrated into traditional reporting. In addition, 66% claim that access to sustainable finance improves corporate understanding and willingness to embrace new sustainable practices.
However, when it comes to disclosure, ING notes that there are still improvements to be made to ensure that corporates are providing the most material and relevant information.
“The pandemic has demonstrated that individuals, companies, investors, and governments can make rapid environmental and social changes for the good, but closer alignment is necessary to rapidly accelerate progress in addressing the climate crisis,” ING’s Americas chief executive Gerald Walker said.
“Our actions are under the microscope like never before and as the report shows, coordinated action and convergence on areas such as ESG standards and policy are essential for accountability and meeting ambitious targets.”