However, despite this new focus, there are still challenges for both investors and issuers. Nearly 80% of companies say they need advice and information from others on how to formulate their strategies for climate change and sustainability and how to carry them out – and over a third need a lot of advice. These figures have increased from 2020, and while some of that requirement might be for nonfinancial advice, around 72% of issuers want financial and investment support to meet their sustainability goals. Within that, 42% say they want a lot of advice, sharply up from 2020.
In every region, more than half of issuers say they expect to actively seek advice on green, social or sustainability factors in relation to capital markets issues in the next 12 months. And that rises to over 60% in Europe and the Middle East, and more than 70% in Asia.
“Part of the issue is that the breadth of issues that have to be analyzed in order to determine whether or not something is a sustainable investment does require expertise, but that expertise potentially isn't usually accessible within finance,” says Farnam Bidgoli, Head of ESG Solutions EMEA at HSBC. “[And] on the regulatory side, especially here in Europe, just the plethora of things that are happening are difficult to keep up with.”
While companies can seek advice from partners outside the business, they’re also looking to recruit sustainability expertise into the business, and that’s creating a skills gap.
“You only have to look on LinkedIn to see the hundreds and thousands of people now who have sustainability in their job titles, which simply didn't exist before. And you know, it's a tremendous thing that the employment market has managed to find these people and train them. But the demand is going to outstrip supply for a very long time to come, I think,” says John Hay, Corporate Finance and Sustainability Editor at Global Capital (formerly Euro Money).
The other main challenge lies in disclosure. Only about a quarter of investors think company’s disclosure is excellent already. Around 40% say it's adequate and about a third say it's inadequate, so there's a clear opportunity for companies that can improve their disclosure. Part of this improvement may come externally, from growing global standards and regulations.
There has been an enormous increase in regulation in the area of sustainable finance, starting first in China, and now very strongly in the EU. Most large economies are developing their own taxonomies of what they consider green and what kind of disclosures companies should be making to investors about their environmental and social performance, and how investors should, in turn, disclose to their clients and the public about what they're doing to invest sustainably.
HSBC has been collaborating with the internet National Finance Corporation and other organizations on a global labelling system for sustainable infrastructure investments that would make investors more confident about investing in them. It’s clear from the survey that market participants would welcome an innovation like this. Only about 8% of investors say they are confident about investing in sustainable infrastructure. Almost 80% say a global labelling scheme would make them either much more confident, or a little more confident.