Capital Markets Corporate

November 13, 2020

Collaborating for change on ESG

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This week has sent ripples of optimism through the ethical and responsible investment space. We saw Britain take a harder stance on climate disclosure and, across the pond, the US is expected to rejoin the Paris Agreement under Joe Biden.

The UK financial watchdog’s new rules will require large, listed companies to make disclosures consistent with a global set of recommendations made by the Taskforce on Climate-Related Financial Disclosures (TCFD). The change will be introduced by the FCA on a “comply or explain” basis, meaning companies must say publicly if they are not applying the TCFD disclosures.

Stage two will include an expansion of the disclosure rule to include more companies, asset managers and pension providers by 2022. And it will consider moving to mandatory disclosure.

There will also be principles to combat against greenwashing, which has been lobbied at the asset management industry. The pressure on the industry could be further accelerated with the Labour Party calling for all UK pension funds to be carbon neutral by 2050.

Moving to action

After a year of incredible uncertainty, the clouds seem to be parting and the time for talk is coming to an end. Taking action is increasingly unavoidable with these latest government announcements making it close to impossible for companies to dodge environmental responsibilities.

While the pandemic has thrown up myriad challenges over the past few months, it has also acted as a leveler and brought different parties to the same table. This week’s developments will be music to the ears of investors who have long been asking for action and clarity around regulation.

For example, the Climate Action 100+ group of investors – with $47 trillion under management between them – has grappled with regulation while also calling for change; most recently challenging the 161 biggest corporate carbon polluters to become NetZero.

The importance of collaboration – between governments, regulators and investors – is clear and will likely continue to be the way forward for driving change into 2021 and beyond. Indeed, research by the European Venture Philanthropy Association indicates that those corporates that manage to make their different social investment streams work in a more complementary way can also deliver greater or deeper impact.

Joining up responsible business activities internally while working with external stakeholders and decision makers is the winning formula to “do good” for society and the planet.

To discuss more about how corporates and investors can adjust their strategies to meet the demands of today and tomorrow, contact our Reinventing Responsibility team here.

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