It wouldn’t be an understatement to claim that ESG is a major priority for organizations in all sectors.
Environmental, social and governance (ESG) concerns have risen rapidly to the top of the corporate agenda, accelerated by such movements as #MeToo and the high profile of the COP26 conference.
Escalating requirements around ESG regulations and reporting and growing public and shareholder pressure amplify the noise around ESG and encourage organizations to ramp up their efforts.
In such a rapidly-evolving landscape, keeping abreast of the latest developments is vital for any organization wanting to remain on the front foot. Looking ahead to 2022, how should this translate into ESG priorities for your organization? What do we know about 2022 ESG trends that can help us prepare for the year ahead?
6 ESG Trends You Need To Know for 2022
Staying on top of the latest thinking in a fast-moving field can be a challenge for time-pressed business leaders. That’s why we’ve done the legwork, rounding up the seven key ESG trends for 2022 and giving you a one-stop summary of the ESG topics to watch in the coming year. These ESG megatrends will be the areas you’ll want to prioritize for maximum impact in 2022.
1. ESG Investment Trends 2022
Whether you are making investments as a business or positioning your firm as an attractive investment option, some themes repeatedly appear when looking at ESG investment trends for 2022.
There will be a focus on more granular ESG data in financial reporting, with territories including the EU, Singapore and India creating more standardized frameworks for ESG disclosures. The “S” of ESG will become more important as an investment criterion, as will issues like biodiversity and carbon offsetting (more of which later). And consumers and stakeholders will shine ever-brighter lights on issues of provenance and sustainable supply chains — making organizations that demonstrate and invest in sustainable, ethical approaches more attractive investments themselves.
2. ESG Disclosure Trends 2022
Earlier this year, the law firm Hogan Lovells predicted that “2021 will be the year global financial regulators and voluntary standard frameworks converge around concrete measures to improve [ESG] data quality and coverage.” This has played out and looks set to continue into 2022 as disclosures become more standardized, more expected and in some jurisdictions, more mandated.
Reporting requirements like TCFD are bringing ESG reporting to the board’s attention and, as a result, magnifying focus on it throughout the entire organization. ESG disclosures look set to become only more prevalent and more insisted upon in 2022.
3. Increased Interest in the Role of AI in ESG
How AI can help ESG will be a big question in 2022. How can technology and artificial intelligence support ESG? As a business trying to optimize your own ESG strategy, AI, automation, and technology are invaluable in enabling you to gather and analyze robust, accurate ESG data across all your ESG-related measures and controls. AI can also help potential investors to collect and assess increasing amounts of data on ESG threats and opportunities, enabling them to make more informed decisions. Organizations’ ESG strategies are under the microscope like never before when investors can harness AI to scrutinize their performance.
4. ESG Trends for the Board in 2022
As we’ve mentioned, board leaders will be confronted by ESG more than ever before in 2022. Escalating ESG requirements are pushing environmental, social and governance factors up the board’s to-do list. With your senior leadership team central to nurturing a compliant and ethical business culture, the board cannot be complacent in their approach. And of course, with executive pay one of the ESG-related issues in activists’ sights, directors have a vested interest in achieving a win-win approach.
5. Increasing Importance of the “S” in ESG
This leads us nicely to “social” — the “S” of ESG. Commentators are in agreement that the social aspect of ESG will take on increased significance in 2022. Schroders’ 2021 Global Investor Study found that more than 57% of investors globally said that social issues had become more important to them during the pandemic. Whether you focus your “S” efforts on internal issues like pay equity, diversity and inclusion programs or reverse mentoring, or on external ones like community projects or supply chain sustainability, they are likely to be under the spotlight in 2022.
6. Being “Nature Positive” Becomes Increasingly Important
Impact on biodiversity is a growing focus for investors and stakeholders, and a core element of the EU’s Sustainable Finance Disclosure Regulations (SFDR) and Taxonomy Disclosure Requirements. This emphasis on ecological issues will further drive organizations in all sectors to strive for nature-positive strategies and outcomes. Carbon Offsetting Will Be Big News While carbon offsetting may still raise questions around its true ability to address climate change, we are likely to see more of it in 2022. It’s a popular strategy for businesses looking to reduce their impact on the environment, albeit by trading greenhouse gas emissions rather than eliminating them altogether. New and increasingly sophisticated structures for carbon offsetting are being developed all the time, making use of evolving carbon capture and storage technology, and being harnessed by organizations keen to minimize their corporate carbon footprint.
Stay a Step Ahead on ESG Trends in 2022
There’s no doubt that ESG will remain a massive topic in 2022 and will only be increasingly important for individuals, legislators and businesses. Hopefully, we’ve given you a steer on some of the top-of-mind ESG topics you can expect to see in 2022 and the ways you can respond to them.
