ESG Watch: Why this year could be a watershed moment for investors on nature-related risk
- Media Manager
- Jan 11, 2023
- 2 min read
Reuters
Written By: Mike Scott
Published: January 11th, 2023
Environmental, social and governance (ESG) issues were central to many of the biggest stories of 2022.
As index provider MSCI points out, regulators around the world have upped the ante “on everything from greenwashed fund names, to stricter climate target disclosures, while the very idea of ESG investing is increasingly politicised”.
These challenges are unlikely to go away in 2023. With the new year starting with record January temperatures in Europe and winter storms in almost all of the U.S., the impacts of climate change will continue to dominate the agenda over the next 12 months.
Yet there are signs of progress. Europe continues to rapidly wean itself off Russian fossil fuels and to increase its renewable energy capacity, in a bid to boost energy security as much as to reduce its emissions. The astonishing growth in renewable energy capacity looks set to continue in 2023. While the impacts of the energy crisis have been far-reaching, it has also accelerated the decarbonisation of the economy in Europe, and shown that a fossil fuel-free future could be closer than was previously thought possible.
Climate regulation is now top of mind not just in the EU, but increasingly in the United States and in the Asia Pacific region, according to MSCI, “from requirements for financial institutions to conduct climate stress tests, to deforestation-free market-access rules”.
Pressure to disclose climate risks will increase, with the U.S. Securities and Exchange Commission’s (SEC) proposed disclosure rules set to be published in April. The International Sustainability Standards Board’s sustainability disclosure standards are also set to launch in early 2023, adding to the impetus for firms to outline how they are dealing with climate impacts, and bringing a certain level of standardisation to the process.
