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ESG Trends and Outlook: 2020

Will 2020 be the breakout year for ESG?

2020 could be a pivotal moment in the ESG revolution as several factors coalesce, including several precipitated by regulation. For example, ESG becomes a fiduciary responsibility while widespread adoption by companies of the Sustainability Accounting Standards Board (SASB) standards as perhaps the 'de facto' disclosure framework is occuring. The EU's Action Plan on Sustainable Finance becomes reality while the German Government plans its first Green Bund issue. In China, the government is introducing enhanced ESG disclosures for companies, while in the United States, ESG is likely to feature as part of the presidential election debate.

This collection of recent papers features institutional thinking about how the ESG agenda is likely to progress during 2020, its adoption into fixed income investing, the rise of impact investing, and the debate that exists about the lack of an adopted 'standard' ESG measure for use by both ratings agencies and index providers.

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ESG Trends and Outlook for 2020

2020 ESG Trends to watch (MSCI)

MSCI offers its insights into five key ESG trends that it believes will unfold this year to take ESG investing to the next level in the 2020s.

The Future is Impact (NN IP, 2020)

This paper from NN Investment Partners highlights the results of a survey conducted by Kirstein, an asset management consultancy. The study examines the state of impact investing in four Nordic countries, investor attitudes to this style of investing, and how they approach its implementation.

Consideration of Sustainability Risks: ESG mandatory or optional? (DWS AM, 2020)

For compliance reasons, this paper is only accessible in the United Kingdom

DWS AM investigates whether 'sustainability' via ESG principles, is now mandatory or optional.

Predictions 2020: A pivotal year for the planet (Thomson Reuters, Jan 2020)

Reuters Breakingviews Predictions 2020 identifies several inter-related issues that feature ESG as a significant influence.

Quarterly Market Review, Q1 2020: A year of turning green (EFG International)

Strategists at EFG International think that in 2020, ESG oriented fiscal spending will become a pivotal issue in Europe and China, with the potential to also influence the US presidential campaign.

Sustainable Investing: Fast-forwarding its evolutions (KPMG/CREATE-Research, 2020)

In this joint report, KPMG International, CREATE-Research, AIMA and CAIA Association explore in some detail, sustainability investing and its impact on the alternative investment industry.

ESG Webinars and Podcasts

Webinar: How to Reconcile ESG and Factor Investing (Scientific Beta, 2020)

Scientific Beta's webinar explores how ESG objectives can be reconciled with factor investing and how these two objectives need to be kept separate.

Podcast: ESG - Through the Lens of Institutional Investors (PineBridge Investments, 2020)

In this podcast, Alessia Falsarone of PineBridge Investments shares her views on alternative energy investing. She explores how global developments are affecting markets and how the adoption and growth in ESG is creating opportunities for investors in emerging industries.

ESG Ratings

Country ESG Ranking Update: Norway rises to the top (Robeco, 2020)

RobecoSAM's Country Sustainability Rankings notes that Norway is now top-ranked, having overtaken Sweden in this latest update.

ESG ratings: friend or foe? (NN Investment Partners, Jan 2020)

NN Investment Partners notes that the use of ESG ratings has increased markedly recently, but that assessing true sustainability can present challenges. They identify five reasons to be circumspect when using ESG rating agencies and examine how investors might avoid some of the pitfalls.

Aggregate Confusion: The Divergence of ESG Ratings (2019)

The authors investigate the divergence between ESG ratings used by the five major agencies down to the most granular level. Interestingly, they find that the rating agencies assessment in individual categories appears to be influenced by their view on the company as a whole.

ESG and Fixed Income

Green Bonds in Perspective (Clifford Chance, 2020)

Clifford Chance examines the green bond market, noting historic milestones, recent growth and its prospects.

ESG Investing and Fixed Income: It's time to cross the rubicon (Amundi AM, 2020)

For compliance reasons, this paper is NOT accessible in the United States

Amundi AM's research paper investigates the impact of ESG investing on asset pricing in the corporate bond market. They note the more positive effect on EUR investment grade bonds than on USG IG and HY markets.

The Global Sukuk Market from an Indexing Perspective (S&P Dow Jones Indices, 2020)

Although not strictly considered ESG, Shariah-compliant bonds known as Sukuk, have seen significant growth in issuance in recent years. The last three years have seen several new issuers other than the two key players of Saudi Arabia and Malaysia help to broaden and deepen the investor base.

ESG Indexes

A Paris-Aligned Climate Index for the Eurozone (S&P Dow Jones Indices, Jan 2020)

S&P Dow Jones Indices sets out a robust framework for the design and implementation of a Paris-Aligned Climate Index aimed at providing investors with reduced risks in the transition process to a low-carbon economy while also capturing financial opportunities that arise.