Martina Chueng, president of S&P Global Market Intelligence, joins Alexis Christoforous of Yahoo Finance to discuss ESG investment trends in 2021.
Video transcription
ALEXIS CHRISTOFOROUS: S&P Global released its list of the main environmental, social and governance trends to be observed this year. Joining me now to talk about it is Martina Chueng. She is president of S&P Global Market Intelligence. Martina, good to see you again.
Before we got to the big trends, I saw that in the report and I was a little surprised. You said that about 90% of companies in the S&P 500 published sustainability reports, but only 16% made reference to ESG factors in their files. This seems very incompatible to me. What does that tell you?
MARTINA CHUENG: Thank you, Alexis. It’s great to be here. You know, it’s an indication of how the perspective on sustainability is evolving. And it’s getting a lot more focused on metrics. And that is what you will see in 16% of companies that have referred to specific ESG factors.
We will see this increase drastically in the coming years, but it is not uncommon. We have also seen this in the 1,500 companies or more that are reporting in the TCFD, which is the Task Force on Climate-Related Financial Disclosures, where there are metrics and specifics. But the consistency of how the structure is applied can vary between sectors and even for companies within a sector. But we expect it to grow a little and get better.
ALEXIS CHRISTOFOROUS: I think this is probably one of the trends that you are seeing, it is the improvement of data in the future. Talk to me about now that we have the new administration – the last time we talked, that was before the election. We were talking about what the new administration would mean for ESG. I know it is still the beginning of the Biden government. But what are you seeing so far?
MARTINA CHUENG: Yes, you know, it all depends on the US administration – not just within the US, but around the world, in fact. And the first big step was, of course, to respond to the Paris Agreement and the announcement of a very ambitious and comprehensive environmental and climate plan. So this is very powerful, both within the United States – which will require the government to take many measures to reduce emissions under the Paris Agreement.
But globally, we now have 2/3 of the global economy, with the United States, committed to a goal of zero net or carbon neutral by 2060. So it starts to become much more aligned with the way other economies and other companies internationally are thinking about it.
ALEXIS CHRISTOFOROUS: I know that another trend that you saw in the report was that conversations about the energy transition are going to become more nuanced, you said, in the next year or so. What do you mean by that?
MARTINA CHUENG: Well, the energy transition is often something that people think of in reference to the energy sector – decarbonizing the electricity grid, the transition from fossil fuels to renewable energies, for example. But in reality, the energy transition is a concept that will affect all industries, all sectors.
And the reason for this is that, for economies to start reducing carbon emissions, each company has a role to play in this, whether in the company’s direct carbon footprint or in the company’s supply chain, for example. And so we are seeing the details and thinking about the energy transition maturing into something that is really much more intersectoral, all parts of the economy coming together to achieve carbon emission reductions, and not just companies specifically in the energy sector.
ALEXIS CHRISTOFOROUS: And I know that you also see threats to nature and biodiversity, particularly in the spotlight this year. What should investors look for there?
MARTINA CHUENG: So it took me a while for the TCFD, the Task Force on Climate-Related Financial Disclosures, to come out of the mouth. And now we are getting ready for TNFD, where N means nature. And this is something that is really exploding.
According to some estimates, if we continue on the path we are taking with respect to damage to biodiversity, we could be looking at about $ 10 trillion in value drained from the global economy by 2050. It is something that regulators and legislators are paying attention to. It is also something that the private sector is paying attention to.
And our expectation is that we will see many more companies making statements about how they think about biodiversity beyond today’s number, which is reasonably low. And we also hope to see more attention being paid to this, whether through public infrastructure and policy makers more broadly.
ALEXIS CHRISTOFOROUS: What about social issues? I mean, leaving the climate aside for a moment, what are some of the social issues that investors will be watching, and watching to see if the companies they are interested in investing in are really paying attention to this?
MARTINA CHUENG: Well, in general, we saw massive growth in sustainable bonds, which is an indicator of investor interest in this, including social bonds, which saw a huge increase in the past year. Then [INAUDIBLE] sustainable [INAUDIBLE] growth in the region of around 50% overall.
And, specifically in relation to social networks, a variety of lenses may be needed. So, certainly, one of the lenses is gender diversity, equal pay. We are seeing many more companies disclosing these factors.
And there is a significant financial impact on that. We know that companies that have greater diversity in their leadership teams, for example, from a gender perspective, perform better. They are based on analyzes that we have carried out at Market Intelligence in the last two years.
But we also hope to see more in terms of social impact on communities. And we think it will be something that will also have a certain increase, as we saw many companies making statements and commitments after some of the challenges that we saw last year, whether they are with regard to social inequality movements, such as the Black Lives Matter movement, which really catalyzed some of those topics to the top of the list.
ALEXIS CHRISTOFOROUS: Well, many ESG trends for us to follow, for sure. Martina Chueng of S&P Global, thank you so much for being with us.
MARTINA CHUENG: Thank you very much, Alexis.