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Sustainable Financing and Investing Survey – Global Report

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New roles and responsibilities for issuers and investors gains potency and permanence.

The revolution in how companies and institutional investors see their role and responsibility on social and environmental issues has continued to gain strength and momentum in the past year.

Indeed, if the pandemic helped provoke a reassessment of the relationship the capital markets have with society, its participants are now actively redefining this relationship with sustainability increasingly at the core. Such profound change is evidenced in our fifth annual global survey of 2,000 capital markets issuers and institutional investors, conducted during May and June.

Powerfully, it shows that in addition to values underpinning why companies and investors care about these issues – 89% of issuers and investors say they are important – the financial benefits of doing so are now recognised more widely than before. In fact, 51% believe that paying attention to these issues can help improve returns or reduce risk, which is the highest percentage in three years.

The results also highlight the larger the size of company or investor (by annual revenues or assets under management), the greater the importance of environmental and social issues. Some 70% of issuers with revenues greater than $10 billion or investors managing over $25 billion see these issues as very important – significantly higher than the global average of 44%.

What’s more, about two thirds of all issuers (64%) say they expect to actively seek advice on green, social or sustainability issues in relation to capital markets transactions in the next 12 months, indicating strong intent and interest in green and sustainable finance globally. And for investors, some 59% of them say they now have a firm-wide policy in place on responsible investing or environmental, social and governance issues – up from 51% last year.

The impact of the pandemic has been a primary driver of participants’ increased focus and attention on these issues – 74% of respondents say so. But also important (more than 60% agree) has been the pressure on their company from society to pay more attention to these issues, and a recognition among respondents that their responsibility to society has in fact changed.

Such a response supports a palpable sense in the market that real, generational change is underway in how capital markets participants see their role and responsibility in supporting society and the transition to a more sustainable world.

This also aligns with moves in some economic regions, such as the EU, to encourage companies and investors to not only consider how environmental and social issues can affect their investments, but also how their investments affect the environment and society.

The emphasis on so-called ‘double materiality’ to bring about a deeper consideration of the impact investments can have, is important. Some 46% of investors surveyed this year say they use impact goals or metrics as part of their investment decision-making – up notably from 37% of investors who said the same in 2020.

Ultimately, investors and companies are thinking more deeply about the impact they and their investments can have because they believe it is right to care about the world and society. This is the main reason why respondents say they care about environmental and social issues, together with the financial benefits, an evolving regulatory regime requiring issuers and investors to act and report, and rising demand for change among customers and employees.

For all the advances, though, challenges inevitably remain. Some even grow. While two thirds of investors this year (63%) see nothing holding them back from pursuing ESG investing more fully and broadly – a significant improvement from previous years – for those that see issues, a shortage of expertise or qualified staff is their biggest problem. The ESG skills gap is a cross-industry issue, but one perhaps most acute in the finance and investment industry given such high levels of demand.

Another problem area is the practice of ‘greenwashing,’ which involves companies intentionally making false claims about their green or sustainable credentials. While such activity is unfortunately inevitable in a booming market, it is threatening to become a real problem, investors warn.

Indeed, some 39% of the largest investors (including pension and sovereign wealth funds with assets under management greater than $25bn) we surveyed say they are very worried about greenwashing in all its various forms.

The survey supports the sense that real, generational change is underway in how capital markets participants see their role and responsibility in supporting society and the transition to a more sustainable world.

Top 10 key findings:

  • 51% of issuers and investors say they care about environmental and social issues because paying attention to these issues can improve returns or lower risks – up from 39% last year and a three-year high. This is particularly the case for issuers (54% say this - up from 33% in 2020) compared to investors (48% - flat to last year).

  • A genuine shift is underway in how capital markets participants view their responsibilities – 61% of issuers and investors say their view of their responsibility to society has changed, where they are now more conscious and engaged than ever on making a positive impact.

  • An astonishing 94% of companies expect to move away from environmentally- and socially-challenged business models in the next five years. Companies are transforming their business models and capital allocation in response to climate change and this will accelerate: 70% of issuers are considering ramping up business activities that might benefit from climate change or starting new ones.

  • Half of issuers say that climate change is already affecting their business or activities – up from 37% last year and a three-year high.

  • 41% of issuers say they need a lot of financial help and investment to meet their sustainability goals – up from 23% who said the same last year. Asia issuers are most in need – 63% say they need a lot of help – while 56% of their Americas peers say they don’t need any help at all.

  • 64% of investors say nothing is holding their organisation back from pursuing ESG investing more fully and broadly – up from 54% last year and the highest percentage in three years. Yet for those investors (36%) who are being held back, a shortage of expertise or qualified staff is the leading reason holding investors back from pursuing ESG investing more fully and broadly – 37% say this, up from 30% last year and a three-year high.

  • A lack of comparability of ESG data across issuers and relatively poor financial returns have fallen sharply as reasons holding back investors from ESG investing – dropping from 50% and 39% in 2020, respectively, to 31% and 25% this year.

  • 64% of Americas investors say they are very worried about greenwashing (companies intentionally making false claims about their green or sustainable credentials) and think it is a serious problem – the highest percentage of any region. Overall, greenwashing is now more widespread and sophisticated than ever before.

  • Social issues are rising in importance for issuers. More than half of our issuer respondents agree or strongly agree that their investors want them to work harder on issues such as gender and ethnic equality. The largest investors are especially focused on companies’ social and human rights performance, with 60% monitoring them and tasking them to make improvements.

  • 61% of issuers say their investors understand their sustainability plans and performance significantly up from 32% last year – with only 1% saying their investors don’t understand what they do very well (down from 9% in 2020). Generally, this is being driven by the increasing amount of information disclosed on these issues together with companies improving how they communicate on these areas to investors.

To download the report in full, click the button below:

COVID shifts, social agendas & more

Global perspectives from issuers and investors in our latest HSBC’s 2021 Sustainable Financing and Investing Survey.

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