Martina Chueng, President of S&P Global Market Intelligence, joins Alexis Christoforous of Yahoo Finance to discuss ESG investment trends in 2021.
ALEXIS CHRISTOFOROUS: S&P Global presents its list of the top environmental, social and governance trends to watch this year. Next to me now to talk about it is Martina Chueng. She is president of S&P Global Market Intelligence. Martina, good to see you again.
Before we got to the big trends, I saw this in the report and was a bit surprised. You said that about 90% of companies in the S&P 500 published sustainability reports, but only 16% reference ESG factors in their submissions. That seems pretty uneven to me. What does that tell you?
MARTINA CHUENG: Thanks, Alexis. It’s great to be here. You know, it’s an indication of how the sustainability perspective is evolving. And it’s driving metrics a lot more. And that’s what you’ll see in the 16% of companies that have referenced specific ESG factors.
We will see that increase dramatically in the coming years, but it is not uncommon. We have also seen it in the 1,500 companies that are reporting on TCFD, which is the Working Group on Climate-Related Financial Disclosures, where there are metrics and specificity. But the consistency of how the framework is applied can vary between sectors, and even for companies within a sector. But we hope that this grows a lot and improves.
ALEXIS CHRISTOFOROUS: So I guess that’s probably one of the trends you’re seeing, data improvement going forward. Tell me about now that we have the new administration, the last time we spoke was before the elections. We were talking about what the new management would mean for ESG. I know these are still the early days of the Biden administration. But what are you seeing so far?
MARTINA CHUENG: Yes, you know, it all depends on the US administration, not just within the US, but all over the world. And the first big step was, of course, responding to the Paris Agreement and the announcement of a very ambitious and comprehensive climate and environmental plan. So this is very powerful, both within the United States, which will require the administration to take some action to reduce emissions in accordance with the Paris Agreement.
But globally, we now have 2/3 of the world economy, with the United States in it, committed to a net zero or carbon neutral target by 2060. So this starts to align much more with the way other economies and other companies internationally are thinking about this.
ALEXIS CHRISTOFOROUS: I know another trend you saw in the report was that the energy transition talks will become more nuanced, he said, over the next year or so. What do you mean by that?
MARTINA CHUENG: Well, the energy transition is often something that people think of in reference to the energy sector, for example, the decarbonization of the electricity grid, the transition from fossil fuels to renewable energy. But, in fact, the energy transition is a concept that will affect all industries, all sectors.
And the reason for this is that in order for economies to move towards reducing carbon emissions, each company has a role to play in that, be it the company’s direct carbon footprint or the company’s supply chain. , for example. And we’re seeing the details and thinking about the energy transition mature into something that is really much more cross-sectoral, all parts of the economy coming together to achieve carbon emissions reductions, and not just companies specifically within the energy sector.
ALEXIS CHRISTOFOROUS: And I know you also see threats to nature and biodiversity, particularly taking center stage this year. What should investors look for there?
MARTINA CHUENG: So it took me a while to get the TCFD, Task Force on Climate-Related Financial Disclosures, out of my mouth. And now we are getting ready for TNFD, where N stands for nature. And this is something that is really exploding.
By some estimates, if we continue down the path we are following regarding damage to biodiversity, we could be seeing around $ 10 trillion in value drained from the global economy by 2050. It is something that regulators and legislators are paying attention to. . It is also something that the private sector is paying attention to.
And our expectation is that we will see many more companies making statements about how they think about biodiversity beyond the current number, which is reasonably low. And we would also hope that more attention would be paid to this, whether through public infrastructure and policy makers in general.
ALEXIS CHRISTOFOROUS: What about social problems? I mean, putting the weather aside for a moment, what are some of the social issues that investors are going to be looking at and seeing if the companies they’re interested in investing in are really giving you the time of day? ?
MARTINA CHUENG: Well, overall, we’ve seen massive growth in sustainable bonds, which is an indicator of investor interest in this, including social bonds, which had a massive increase last year. So [INAUDIBLE] sustainable [INAUDIBLE] growth in the region of about 50% overall.
And specifically socially, you may require a variety of lenses. So certainly one lens is gender diversity, pay equity. We see that many more companies reveal those factors.
And there is a material financial impact on that. We know that companies that have more diversity in their leadership teams, for example, from a gender perspective, perform better. These are based on analysis that we have conducted at Market Intelligence over the past two years.
But we would also expect to see more in terms of social impact in the communities. And we believe that it is going to be something that is also going to require a small increase, since we have seen many companies make declarations and commitments after some of the challenges that we have seen in the last year, either with respect to movements of social inequity. like the Black Lives Matter movement, which has really catalyzed some of these issues to top the list.
ALEXIS CHRISTOFOROUS: Well, lots of ESG trends for us to follow, for sure. Martina Chueng from S&P Global, thank you very much for joining us.
MARTINA CHUENG: Thank you very much, Alexis.