The election of Donald Trump, who intends to pull the US out of the Paris climate change agreement, is not expected to distract investors from environmental, social and governance (ESG) investing, according to MSCI.
The firm said that a focus on policy uncertainty on climate change following the election of Trump is misplaced and in a paper called ‘2017 ESG trends to watch’, MSCI said it expected investors to focus more on physical climate change risks this year, such as water scarcity.
A boost for Asian corporate governance is also expected.
MSCI’s full list of ESG trends is below.
2017 ESG Trends to Watch
· Owning the Long Game
In 2017, some of the world’s largest investors may differentiate themselves by gearing toward the long view as globalization and technological advancements have strained social cohesion and fanned populist sentiment.
· The Shift from Regulatory to Physical Risk
Focus on policy uncertainty around climate change in the wake of the U.S. election is misplaced. In 2017, we believe investors will turn their attention to mitigating exposure to the physical risks from climate change, especially the encroaching scarcity of water in regions that range from the Middle East to the US.
· Choosing Stewardship in Asian Capital Markets
Rapid adoption of codes that promote engagement between companies in Asia and investors may be upending the conventional wisdom that Asia lags global peers in corporate governance. In 2017, the real work starts, with investors facing a choice between paying lip service to influencing companies’ behavior and pushing for the change that stewardship brings.
· ESG Investing as a Precision Tool
Research that points to ESG factors as a performance indicator continues to grow. In 2017, institutional investors may apply more differentiated and targeted strategies to integrate ESG signals across asset classes, markets and factor exposures.
· Adoption of a New Performance Language
The U.N. Sustainable Development Goals are becoming a de facto framework for bringing together investors, companies, governments and citizens with the aim of protecting the planet, ending poverty and promoting peace and prosperity. In 2017, we see the increased adoption of corporate disclosures targeting these goals as a boost for institutions that aim to broaden their programs for investing with impact.
· Green Shoots in China and India’s Sustainable Finance
The surge of innovation in sustainable development projects and initiatives in China, India and other emerging markets has been greeted with equal parts optimism and skepticism by institutional investors. In 2017, domestic and global standards will likely converge as companies in these markets deepen their understanding of standards required to attract foreign capital.
©2017 funds europe
