2022 ESG Investor Outlook - What Companies Need to Know
Leaders Arena has developed an analysis of investors' ESG priorities for 2022 to create a reflection of the most talked about and pressing ESG topics.
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Our four key themes for 2022:
1. Investors will seek greater communication on cross-sector risks
2. Companies with credible long-term plans will be best placed to take real action
3. The investor drive for comparable data may start to see tangible results
4. Sustainability of value chains will be the bellwether of ESG leadership
Key Themes Summary
The ESG-Year Ahead
Due to increased importance and influence, companies should track the evolution of the following key trends to anticipate investor demands. By planning effectively, companies will be able to strategize their time and resources to address ESG issues that are of concern to key investors and other stakeholders.
"Will you go the way of the dodo, or will you be a phoenix?”
(Larry Fink, 2022 CEO Letter).
Investors will seek greater communication on cross-sector risks
Investors have already begun setting their engagement expectations on corporates in 2022, which will see increased ESG focus across most sectors in risks including Human Capital, Biodiversity Loss, and Physical Climate Change. Engagement teams will want to know how companies are planning to manage volatile workforce trends and in preparation for potential proxy votes, what action and transparency is being taken with respect to Diversity, Equity, and Inclusion. Biodiversity Loss and Physical Climate Change are both systemic risks which means that companies will need to explain how these risks are being governed. Additionally, Investor Relations teams will need to communicate how management is addressing the interconnectivity of these environmental issues.
Companies with credible long-term plans will be best placed to take real action
In order for companies to integrate material ESG themes, clearly defined ESG strategies and planning need to be reinforced and communicated through a top-down and long-term outlook. Using the right Net-Zero standard for your company is the clearest example of this. Through the creation of realistic and robust ESG strategies, companies will be best placed to take real action on broader sustainability challenges such as the climate transition, social and economic inequalities, and the digital transformation.
The investor drive for comparable data may start to see tangible results
Investor demand for greater comparability of disclosed sustainability data by corporates is set to be supported by significant legislation on disclosure frameworks from the EU and US. The introduction of new regulation, the consolidation of existing frameworks and the greater importance placed on external assurance, should soon combine to improve confidence in ESG metrics.
Sustainability of value chains will be the bellwether of ESG leadership
Corporates will need to consider all ESG impacts within their value chain as well as their ability to influence change in these areas. Companies can illustrate ESG leadership by appreciating and using the influence they have, by positively affecting their partners’ and suppliers’ attitudes and actions toward climate change, human rights, and overall sustainability.
Leaders Arena’s unique ESG market intel helps companies to better
integrate, engage and lead their dialogue with Responsible Investors.
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