ESG from Utah to Asia Pacific

"This ESG crusade being perpetrated by the liberal elites must be stopped, and it’s time that West Virginia and other states band together to fight back against the financial harm these radicals are trying to inflict upon our states. Hopefully S&P and other credit ratings agencies will come to their senses and halt the use of these subjective, unnecessary ESG ratings schemes and maintain a strict focus on the financial metrics that actually matter.''

-? Riley Moore, West Virginia State Treasurer???

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Perception is reality. For a company,?the way?it?conducts its business and?how the outside world and investors perceive it?creates a huge difference when it comes to its?image, perception, and value. Although the public markets have always emphasized this,?some companies realize it after an unpleasant experience. It is a sad reality that?quality ESG investment opportunities in emerging markets are being obscured by incomplete and poor-quality corporate disclosures. What we have?experienced is that the asymmetry of ESG information and as a result, the?divergent views of investors is not only due to?companies?not capturing all the relevant ESG information in their reporting but also because of several practical challenges such as?local language reporting and lack of consistency across sectors and countries. While discouraging,?the silver lining?is that many of these problems can be resolved by bringing in an investor's perspective and through the use of technology. The solutions are simple and cost-effective.?And moreover,?there is a tremendous upside to be unlocked in the EMs.

The growth in green, social, sustainability and sustainability-linked (GSSS) bond issuance has gone through the roof.?2021's issuance?of more than a trillion dollars is almost 60% higher than the total issuance in 2020, and more than triple the $326 billion GSSS bonds issued in 2019. The trend is likely to continue and the next few years could possibly?be even more hectic. While all of this is welcome,?there are challenges that will need to be addressed.?As it is?with any hyper-growth situation, the key?challenge?is for the?investors to ensure that money is being spent as per the commitments made. So far, the overall track record on certification, project evaluation, reporting on use of net proceeds and in other key areas has?largely been mixed and urgent improvements are clearly needed.?It is important to clarify that this doesn't necessarily?mean that the?problem lies with the intent of the issuers, but better and more comprehensive tracking and reporting would?definitely help. There are issues like reporting in local language which makes it difficult to?assess?the progress. And as the market evolves, these will be important factors for GSSS bonds to succeed and gain?a footing?as a force for good.

Also in the news

ESG investment mentions grew fastest in Asia-Pacific companies in 2021. Businesses worldwide need to divert substantial investments to achieve United Nations’ sustainable development goals by 2030. Firms in Asia Pacific region saw the highest sequential growth of 30% in ESG investment mentions.

Fund Managers Doing Bogus ESG ‘Engagement’ Are Put on Notice. ESG funds that are peddling bogus engagement strategies are about to feel some heat as Morningstar Inc. moves to the next stage of its quality control of the industry.?

Investors, Regulations Drive Oil and Gas ESG Disclosures. More oil and gas producers in the United States are disclosing their ESG efforts as pressure from investors grows, as well as a result of the pending SEC regulations.

ESG rises in importance to university endowment funds. University endowment funds are turning their back on fossil fuel. University endowments are increasingly using more of ESG criteria, with a particular focus on committing to sustainable investments and walking away from fossil fuels.?

Utah pushback against S&P ESG indicators. Utah Governor Spencer Cox, Senators Mike Lee and Mitt Romney, along with its treasurer and attorney general, sent a letter to S&P, arguing that "ESG component is political and therefore unfair".?