Market Overview: Investor Focus On ESG Will Transform Sustainability Strategies

Report
Corporate Sustainability Leaders
David Metcalfe
David Metcalfe
18 Feb, 2021

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Executive Summary

The accelerating embrace of Environmental Social and Governance (ESG) metrics by the financial community is radically changing the way CEOs at listed firms need to think about sustainability. Passive sustainability strategies which focus on voluntary disclosures, glossy brochures and self-selected material issues are no longer fit for purpose. Whether it is the energy transition for firms in the fossil fuel value chain, the circular economy for product manufacturers or global governance issues for services firms, CEOs need to adopt a more active approach to sustainability management.  To satisfy the thirst of investors and lenders for superior ESG performance, CEOs need to fix governance, overhaul ESG information management and select one of five active sustainability strategies depending on the value at risk. Digital strategies will be a key ingredient of active sustainability strategies and there will be significant upside for vendors which already offer systems of record for environment, health and safety; governance, risk and compliance; product stewardship; and supply chain transparency.  

In 2021 CEOs Ignore Investor Views On ESG And Sustainability At Their Peril   

Market Forces Will Compel Executives To Transition Away From Passive Sustainability Strategies  
The Focus Of Financial Markets On ESG Will Trigger A Shift To Active Sustainability Strategies 
Many Factors Will Slow The Transition From Passive To Active Sustainability Strategies

CEOs Need To Fix Sustainability Governance To Succeed In The Next Decade  
In An ESG World, Sustainability Can No Longer Be Parked In Corporate Communications
Governance Of Sustainability Issues Needs To Be Embedded In Operational Decision Contexts

Overhauling ESG Information Management Will Become A Big Priority  
Firms Need A Flexible Data Strategy To Cope With A Fast-Changing ESG Landscape
Deployment Of ESG Information Systems Should Reflect Emerging Risks And Opportunities
Existing Software Applications Will Accelerate The Success Of ESG Information Systems 

Five Sustainability Strategies Respond To Investor Pressure On ESG Performance  
#1. Deliberate Delay Continues As The Preferred Strategy Of Defensive CEOs
#2. Risk Mitigation Meets The Needs Of CEOs In Challenging Positions On Sustainability Trends
#3. Active Alignment Emerges As The Glidepath To Benefit From ESG Opportunities
#4. Portfolio Optimization Is A Necessary Response To Sustainable Industry Transformation
#5. Innovative Strategies For A Sustainable Future Fully Align With ESG Market Opportunities

Figure 1. Financial Markets Participants Fire A Barrage Of ESG Requests At Issuers 
Figure 2. ESG Dealflow: Acquisitions, Investments And IPOs Ramped Up In 2020 
Figure 3. Comparison Of Passive And Active Sustainability Strategies 
Figure 4. Use Cases For A Flexible ESG Information Architecture 
Figure 5. Impact Of Financial Markets’ ESG Developments On Corporate Sustainability Strategies
Figure 6. Existing Software Applications Form The Building Blocks For ESG Information Architecture 
Figure 7. Five Sustainability Strategies Respond To ESG Pressure From Investors  
Carbon Cap Management, Quentic, Newmont Corporation, AdaptIT, Evora, Bloom Energy, SynTao Green Finance, Pacific Gas & Electric (PG&E), Accenture, OneReport, Accuvio, Refinitiv, Switch Automation, Perpetual, Orbia, GBatteries, RiseWise, alva, KPA, Task Force on Climate-related Financial Disclosures (TCFD), Treeni, Rusheen Capital Management, Johnson Controls (JCI), Autoriteit Financiële Markten (AFM), Seven Oaks Acquisition Corp, Meteomatics, RWE, Novisto, Databricks, Sustainalytics, BlackRock, Facebook, Adidas, London Stock Exchange Group (LSEG), Tesla, Microsoft, Volvo Cars, EnerNOC, European Securities and Markets Authority (ESMA), ECPI Group, Intesa Sanpaolo, Santander, Aclima, Workiva, Rio Tinto, Sinopec, Alcumus Group, World Wildlife Fund (WWF), Enterprise Health, Bank of England, Bank of Canada, Jupiter Intelligence, University of Massachusetts, Chevron, Hong Kong Exchanges and Clearing (HKEX), International Capital Market Association (ICMA), Bloomberg, Global Reporting Initiative (GRI), Golder, Veriforce, EcoATM, Velocys, DRAX Group, Deepki, Efforce, BuildingIQ, Mexichem, DWS Group, LucaNet, Atos, Institute of International Finance (IFF), SINAI Technologies, Fabriq, Occidental Petroleum Corporation, Autorité des marchés financiers (AMF), Willis Towers Watson, Planon, Oracle, Avetta, Statoil, Terrafertil, Institutional Shareholder Services (ISS), GES International, Solactive, Data Simply, Emitwise, Google, PIMCO, Allianz, RepRisk, Four Twenty Seven, Alstom, Bill Identity, General Electric (GE), State Street, UL, Urgentem, Schneider Electric, Hatch Data, Workday, FactSet, SustainAbility, Global Initiative for Sustainability Ratings (GISR), Satellite Applications Catapult, Iberdrola, Verisk 3E, Jaguar Land Rover, Cosmo Tech, thinkstep, U.S. Securities and Exchange Commission (SEC) , Marathon Oil, InfoTrie, Metrio, Lincoln Clean Energy, Morphic Asset Management, Board International, RobecoSAM, Cambridge Institute for Sustainability Leadership, S.Café, Trillium Asset Management, Landmark Information Group, SAP, Energisme, CVC Growth Partners, GOARC, MetricStream, The Climate Service, Bombardier, Cority, European Investment Bank (EIB), Cenovous Energy, Morningstar, Climate Risk Services, ISS, VelocityEHS, Ecometrica, Pulsar Platform, Plexus, Carbon Engineering, Anglo American, General Motors (GM), Arcadis, ASM, Environmental Resources Management (ERM), Urjanet, Accruent, Trafigura, Achilles, Total, Natixis, Envizi, Volkswagen (VW), GHGSat, IsoMetrix, Pro-Sapien, Diligent, Certent, Snowflake, Prophix, Teva Pharmaceuticals, EcoOnline, Salesforce, Transparency International, Climeworks, Datamaran, Prudential, Ellerston Capital, T. Rowe Price, Carbon Tracker, Diagram, Scope 5, Lloyds Banking Group, EcoAct, Mercedes-Benz, Global Real Estate Sustainability Benchmark (GRESB), Vigeo Eiris, Sphera, EnHelix, Rice Investment Group, Financial Conduct Authority (FCA), Yardi, Nestlé, American Petroleum Institute (API), Ideagen, CBRE Global Investors, BlackLine, Sway Ventures, Goby, Copperleaf, Coronal Energy, IBM, MioTech, Enablon, NAVEX Global, RealPage, Aston Martin, Loan Market Association (LMA), GridPoint, Enel X, Assent Compliance, Sustainability Accounting Standards Board (SASB), Equinor, Vale, GMI Ratings, International Monetary Fund (IMF), Presidio Graduate School, Clarity AI, ClearTrace, ISN, Manzama, Scottish Widows, Tellus Institute, Siemens, Revlon, Sedex, Sierra Club, Gensuite, Ceres, Barclays, Smog Free Tower Project, Deutsche Börse, Carbon Delta, Johannesburg Stock Exchange, PayPal, Ørsted, Infosys, Carnrite Ventures, HBTC, Truvalue Labs, SAI Global, Graticule Asset Management, Colgate-Palmolive, Rainforest Alliance, Enel, Financial Stability Board (FSB), BP, 3M, iPoint-systems, Bithum, Matter, Persefoni, Measurabl, Gap Inc., StatPro Group, Quantis, Corvex Safety, EcoVadis, Phillips, Patagonia, Ashcroft, Deloitte, Fitch Ratings, Corporater, National Geographic, ICE, Scania, Benchmark Digital Partners, MSCI, Clean Energy Ventures, FigBytes, Trintech, Who's Good, CSRware, Health & Safety Institute (HSI), Source Intelligence, Unilever, Project Canary, Honeywell, NY Stock Exchange (NYSE), HSBC, Vena Solutions, SSE, JUUL, United Nations (UN), International Integrated Reporting Council (IIRC), Kohler, Rolls-Royce, Red Flag Group, Act Analytics, Intelex, The Ocean Cleanup, Carbon Disclosure Project (CDP), International Financial Reporting Standards (IFRS) Foundation, Impossible Foods, Coca-Cola, Moody's Investors Service, ProcessMAP, Brandwatch, Acclimatise, Ernst & Young (EY), Diginex Solutions, MarketPsych, Greenpeace, NASDAQ

About the Author

David Metcalfe

David Metcalfe

CEO and Co-Founder

David is the CEO and co-founder of Verdantix, where he leads the firm’s strategic direction and client engagement. Since co-founding the firm in 2008, David has built a …

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