In 2023, more shareholders than ever are putting ESG front of mind when choosing where to invest. And as increasingly passionate generations grow into the investment landscape, ESG will get progressively important, meaning businesses need to stay ahead of the curve.
Let's explore some trends driving impact this year in the ESG space:
Proactive stance against rising issue
ESG covers a range of issues and we’re increasingly seeing stakeholders expect companies to align executive pay with ESG objectives.
The importance of fair pay has been front and centre in stakeholders' minds this year, with people across the globe facing rising inflation and cost-of-living crises. Against the backdrop of this macroeconomic environment, stakeholders are seeking pay transparency and fairness, where all employees are paid a fair wage across the board.
Of course, executive pay issues aren't the only things people should keep top of mind, as investors take a stance on diversity, environmental targets, and all the aspects falling under the ESG umbrella.
Comprehensive reporting building trust
Businesses more than ever are expected to be able to properly report on their ESG targets and priorities. This includes scope 1, 2 and 3 emissions for many of the FTSE 100.
It's for this reason that businesses should be prioritising the quality of their sustainability reports. As investors integrate ESG factors into their decision-making processes, they expect companies to be able to clearly demonstrate their responsible business practices.
By providing accurate environmental reports, investors can identify sustainable investment opportunities. By reporting relevant data and metrics, companies can also showcase their progress in areas like carbon emissions reduction, supply chain responsibility and governance practices. This means businesses are also able to avoid greenwashing and greenhushing claims by providing clear evidence of their progress.
When done effectively, sustainability reporting can be a source of competitive advantage. Both providing transparency to investors to drive more informed decision-making, as well as improved sustainability performance by the companies themselves by verifying accountability.
Value-driven retail investors
Looking beyond financial returns as a sole measure of success, 82% of investors from the ages of 18-34 prioritise their portfolios in line with personal values, seeking to drive environmental and social change through their investments.
The rise of the young investor is also impacting the investment landscape, as they leverage their collective voice, urging organisations to be accountable for both their performance and the modes in which they engage with their shareholders.
ESG considerations are shifting towards centre stage in investment decision-making, looking towards how responsible practices relate to long-term success for both companies and shareholders.
