ESG Trends 2022

In 2021, we saw an increased value placed on Environmental, Social and Governance (ESG) matters by governments, the business sector, and other stakeholders at the local and international levels. In the year ahead,these matters will continue to dominate and form part of key strategies for many companies and government agencies. This is due to the growing pressures to shift corporations towards more “socially conscience and environmentally friendly” ways of doing business. As such, we have rounded-up our top three ESG themes to track this year:

 

  1. Climate change and the Net-Zero goal by 2050

At the 26th annual summit of the Conference of the Parties (COP26) which took place between 31 October 2021 to 12 November 2021 in Scotland, more than 2,000 companies committed to the new science-based targets for reducing their emissions in line with the Paris Agreement climate goals. This has placed more emphasis on climate change as a key focus for investors. As a result, there will be an increased scrutiny on companies and countries to deliver on those commitments, with stakeholders looking for visible action, transparency, and good quality reporting. We are also likely to see climate change expand to include more broader issues like the effects of climate change on communities and biodiversity and the role different stakeholders can play in the prevention of those impacts.

 

  1. Consistent ESG reporting

We anticipate seeing an increasing push to establish a consistent and reliable global standard on sustainability, ESG performance and its impact. The International Sustainability Standards Board (ISSB) was launched in late 2021 by the International Financial Reporting Standards Foundation at COP26. This is a major step towards creating a unified and consistent sustainability disclosure standard. ESG and sustainability reporting and disclosures will continue to be an area of focus, as the world looks to move towards standardised reporting. With more than 34 regulatory bodies, we expect to see convergence in some core areas in disclosure and reporting.

 

  1. Supply Chains

In 2022, we expect to see more companies develop strategies that focus on Scope 3 emissions of the Greenhouse Gas (GHG) Protocol, namely the indirect emissions that occur within a company’s value chain. As the world’s biggest companies work towards achieving net-zero emissions, the opportunity is that there will be a trickling down effect onto their suppliers. Tackling Scope 3 emissions can be ground-breaking for climate action and the drive for sustainability. Although much of the attention has been predominantly on decarbonising direct emissions (Scope 1) and purchased electricity, steam, heat and cooling (Scope 2), reducing Scope 3 emissions will also be crucial in achieving the Paris Agreement goal.