- Ben Poole
- Editorial Team, Treasury Management International (TMI)
HSBC’s Sustainable Financing and Investing Survey 2021 captures how the capital markets are increasingly embracing environmental, social, and governance issues. Here, TMI presents some of the key highlights for treasurers to be aware of.
Companies and institutional investors increasingly understand that an active and positive stance towards environmental, social, and governance (ESG) is good for both the planet and business. This is one of the key findings of HSBC’s Sustainable Financing and Investing Survey 2021, which reveals that 51% of respondents believe that paying attention to these issues can help improve returns or reduce risk.
HSBC’s fifth annual global survey of 2,000 capital markets issuers and institutional investors, conducted in May and June this year, also found that nearly nine out of 10 issuers and investors (89%) say that ESG is important to their business. The theme is being taken particularly seriously in the Americas, where 80% of investors say ESG issues are very important – more than double that of any other region.
Ramping up ESG activities
Companies are transforming their business models and capital allocation in response to the benefits of being proactive around ESG. Some 70% of issuers are considering ramping up climate-friendly business activities or starting new ones. In the Association of Southeast Asian Nations (ASEAN) region, 84% of issuers say they expect a noticeable or substantial change to capital allocation within the next five years.
The results also highlight the fact that the larger the company or investor size, the greater the importance of ESG issues. Approximately 70% of both issuers with incomes greater than $10bn, and investors managing more than $25bn, see them as very important – significantly higher than the global average of 44%.
In addition, almost two-thirds of all issuers (64%) say they expect to actively seek advice on sustainability issues in relation to capital markets transactions in the next 12 months, indicating intent and interest in sustainable finance globally. In Asia, this number reaches 78%. For investors, 59% say they now have a firm-wide policy in place on responsible investing or ESG issues – up from 51% last year.
Social pressure
The impact of the pandemic has been a primary driver of participants’ increased focus in this area, according to almost three-quarters of respondents (74%). External pressure has also been a catalyst, with more than 60% noting that there has been societal pressure on their company to pay more attention to ESG.
There is a greater emphasis on this ‘double materiality’ where firms are not just taking into account sustainability-related impacts on their organisation but also accounting for the impact the business has on these issues. Almost half (46%) of investors say they use impact goals or metrics as part of their investment decision-making – up from 37% in 2020.
The reasons why investors and companies are giving more thought to the impact of their actions include believing it is right to care about the world and social issues, being more aware of the financial benefits, the need to comply with an evolving regulatory regime, and rising demand for change from customers and employees.
The greenwashing effect
Almost two-thirds of investors this year (63%) see nothing preventing them from pursuing ESG investing more fully and broadly – a significant improvement from previous years. This figure was even higher among European investors (88%). Despite these advances, however, challenges still remain. For those firms that do see issues in pursuing ESG, a shortage of expertise or qualified staff is their biggest obstacle (37%). This figure is 61% in the Middle East and North Africa (MENAT) region.
Another hurdle is the practice of greenwashing, whereby companies intentionally make false claims about their green or sustainable credentials. While such activity can only be expected in a booming market, according to investors, it is threatening to become a real difficulty. Indeed, some 39% of the largest investors (including pension and sovereign wealth funds with assets under management greater than $25bn) surveyed say they are very worried about greenwashing in all its various forms.
Despite these downsides, which need to be managed and monitored, the overall survey findings point to both issuers and investors thinking proactively about the benefits of adopting a sustainable approach to business. Almost all (94%) companies expect to move away from business models that are environmentally and socially challenged within the next five years.
Key findings:
To discover additional insights from the survey, view the complete findings here
