A record year for ESG

December 31, 2021

With 2021 coming to a close, Minerva takes a brief look at the major trends seen this year and comments on the future of ESG investing.

As of November 2021, $649 billion US dollars had been invested in ESG-focused funds globally. This figure marks a watershed year for ESG investing, driven by rising awareness of climate risks among companies, and brought about by the efforts of shareholders and regulators alike.

Issues such as remuneration, social responsibility, and especially environmental sustainability considerations have substantially risen in the priorities and problems companies consider in their operations. Likewise, shareholders challenges to companies failing in such areas have been driving this change forward, whilst regulators have stepped up efforts to enforce ESG classifications and reporting requirements.

Stakeholders from across the financial industry came together for the first time at this year's Conference of Parties, COP 26, drawing climate change and emissions sharper into focus for the entire industry. The world looked on as the private sector was brought to the centre of the global discussion on climate, adding pressure for serious action.

Regulators in Europe and the US were prepared for the added pressure, with regulatory bodies such as the US Securities and Exchange Commission introducing new rules for the disclosure of ESG metrics by asset managers. The European Commission sustainable finance regime continued its rollout.

On the AGM front, Shareholders were increasingly empowered to challenge boards on their sustainability claims, with the landmark ousting of Exxon's board members by hedge fund activist Engine No 1. Shareholder proposals regarding climate and environment gained support over last years figures, rising to 32% in the US over 27% in 2020.

The year-on-year increase in shareholder support has been directly supported by the changing regulatory environment. Looking forward to 2022, the further development of regulations such as the EU Taxonomy, and the UK's own green taxonomy will no doubt provide a boon for ESG investors.

In 2022, companies will face a growing number of field challenges over their sustainability as pressure to adhere to ESG principles continues to grow. Asset owners and managers with an ESG focus have great potential to see record growth and must continue to develop robust stewardship practices.

Minerva empowers professional investors with the essential tools and critical data to make informed, sustainable stewardship and proxy voting decisions. Check out our series of Minerva Briefings on important developments in ESG. To find out more, say hello@minerva.info.