Why COVID-19 will be the “ultimate accelerator” for sustainable finance

2021 will see a push for “simplicity and harmonization” in ESG, according to Refinitiv global head of ESG Elena Philipova, who believes that global finance has “done a phenomenal job in over-engineering the problem statement and solutions”.

“This has created market tension, conflicts of interest, and the inability to scale and mainstream sustainability and ESG considerations into investing and financing decisions,” Ms Philipova said.

“We saw numerous attempts to streamline and standardize the core definitions and principles around ESG in 2020. That’s why I think 2021 will be the year of a strong push for simplicity and harmonization –  starting with data and transparency.”

Refinitiv’s new report – Top ESG Trends for 2021: Stability and Sustainability in the Investment Community –  brings together expert analysis from a number of leading industry figures, including GoImpact co-founder Helene Li, who believes that “COVID-19 has highlighted the urgency to combat climate change and social inequality, prompting a sense of urgency for rebalancing.”

“The pandemic and ensuing incidences have acted as a powerful accelerator into channelling more capital and resources to plug some of the gaps COVID-19 has uncovered. The pandemic has exposed the cracks and societal issues in our system. In doing so, it refocused our attention on each of the different facets of ESG,” Ms Li said.

The report also predicts that “disillusioned” ESG investors will start looking beyond surface-level intelligence and towards something more focused and transparent.

“Fund shops are no longer simply excluding firms in sensitive industries. Instead, they are finding companies that are innovating to achieve meaningful ESG goals and positioning themselves to perform well financially,” said Refinitiv Lipper global head of research Robert Jenkins.

“We are also seeing comprehensive analytics systems that are complete with new metrics tailored to assess corporate ESG acumen.  ESG innovation and corporate leadership are becoming more transparent, to the benefit of both investors and global ESG goals.

Other takeaways from the report include an increased drive among investors to achieve the United Nations SDGs and uphold human rights; companies moving to halt biodiversity loss; and the opportunities created by Asia’s need for sustainable urban growth.

“An unwelcome black swan alighted on 2020. With a swift flap of its wings, it swept away all reasonable predictions, set new precedents, and opened our eyes to some harsh realities. There was nothing good about the COVID-19 pandemic, and it would be crass to suggest otherwise,” Refinitiv said.

“Yet, as we gather our thoughts and refocus on the year to come, there are a number of key lessons to be learned – and some reasons to be optimistic.”

Find the free report here.