ESG Principles Stand Firm as Financial Market Pillars Despite Challenges

At a time when the concept of Environmental, Social and Governance (ESG) has come under pressure, Bloomberg Intelligence’s inaugural ESG Market Navigator survey has found that ESG remains a backbone of financial markets and corporate strategy, driven by global regulation, consumer demands and competitive ambitions.

The survey, conducted in collaboration with Bloomberg New Economy, canvassed the views of 250 C-suite executives and 250 investors globally.

Although geopolitical risks and macro concerns may shift priorities in the short term, and currently only 55% of C-suite executives see ESG as one of their top two priorities, the survey indicates strong long term support for ESG from both senior executives and major investors in all regions of the world; in fact 85% of investors and companies surveyed plan to boost ESG investment over the next five years.

While costs of transition and regulatory compliance are seen as major hurdles, executives view ESG as benefiting reputation, access to capital and competitiveness, and a vast majority (84%) say it helps deliver a more robust corporate strategy.

The same number said it is a material factor in terms of M&A and 81% said they were worried about losing market share if they fall behind peers. Seven in 10 executives view energy-transition efforts as a competitive advantage, and 75% say that failing to plan may expose them to revenue loss and activism.

Though the majority said “greenwashing” makes ESG goals increasingly difficult to articulate, 73% believe the benefits are worth the commitment and associated scrutiny.

Likewise, a majority of investors (85%) reported that ESG leads to better returns, resilient portfolios and enhanced fundamental analysis. Despite data consistency and funds regulation challenges, 90% of all respondents said that ESG could drive better returns over the next 12 months than the rest of the market, 92% said ESG helps deliver a more resilient investment portfolio strategy, and 86% said it is key to attracting and/ or retaining clients.

Adeline Diab, Global ESG Research and Strategy Director at Bloomberg Intelligence, said: “ESG has moved from a fringe concern, to mainstream and finally, to a mandated necessity. We expect 2024 to be about ESG accountability and an era where investor-corporate dialogue will be vital, 60% of investors hold companies answerable on ESG, while 40% of executives face ESG questions on over half their investor calls. I firmly believe that scrutiny will help shape a more credible ESG market over time.’

Other key findings of Bloomberg Intelligence’s inaugural survey were: huge support for Artificial Intelligence (AI) in the context of ESG. Nine out of 10 executives and investors stated that AI is a ‘friend not foe’ for ESG, helping to improve traceability, generate better data and uncover controversies across languages, among other strengths. Interoperability of regulations (15%) and climate risk assessments (12%) for investors, measuring impact and litigation risks for corporations are top of mind for 2024. In addition, water, circular economy, as well as biodiversity emerged as new themes besides clean energy.

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