2023, the year of responsible investing

Yasmine Raso

Senior Journalist, Financial Newswire

13 January 2023

After a decade of rapid growth as the world began to grapple with several environmental and social challenges, the environmental, social and governance (ESG) and responsible investing markets are on track to record a year ahead of “meaningful change”.

According to Calvert Research and Management, a global responsible investing firm, research completed by investors to determine how companies stack up against each other and certain standards will be a crucial component in 2023 and beyond.

“To stay relevant as capital market participants in 2023 and beyond, we believe responsible investors must intensify research into how well companies are managing their specific exposures to financially material environmental and social factors, analysing their near- and long-term financial impacts,” John Streur, Chief Executive Officer of Calvert, said.

“Multidimensional research with clear connections between corporate behaviour and corporate financial outcomes must inform both security selection and corporate engagement efforts, including ESG activism.”

Streur also said while investors have pushed companies to increase their transparency as stricter disclosure requirements were put in place, the same could be on the cards for responsible investment asset managers regarding their own research methodologies.

“Investors need clarity around the linkages between corporate ESG performance, financial outcomes, security selection and the results of corporate engagement and activism,” he said.

“Understanding corporate governance will continue to be relevant for all types of investors, but the need for depth and granularity in responsible investment research and corporate engagement will dominate the ESG and responsible investing business in 2023 and beyond.

“The responsible investing teams and firms that can succeed in doing this will continue to thrive and gain investor market share, becoming increasingly relevant participants in global capital markets.”

The chief executive also highlighted how the social, environmental and geopolitical issues that plagued 2022 can help realise the need for “voluntary, market-led solutions” for such challenges, “and the need for stronger, deeper ESG research and engagement”.

“We need corporations that can advance viable solutions do so while producing competitive financial returns for investors. Finding those winners and differentiating the rest requires exhaustive ESG research,” he said.

“Government actions in 2022 — in terms of setting standards for ESG and responsible investing, as well as intervention in trade and industrial policy — underscore how a shift to deeper research and voluntary, market-led solutions are under way and will likely dominate in 2023.”