The pandemic was a pivotal moment for organisations to engage in environmental, social and governance (ESG) issues, encouraging them to pay closer attention to external risks.
Julie Brown, CFO and COO at Burberry, said it prompted businesses to use their “scale and influence to make a real difference" to the communities where they operate.
“The pandemic really showed the importance of ESG and the opportunities businesses have to make a meaningful contribution to shape and support the world in which their stakeholders live," she said in an email. “It is no longer acceptable to not look beyond your own business – the onus is on all of us to drive positive change and build a more sustainable future."
Demand among investors for ESG-related products continues to rise, with $54bn (£39.2bn) pouring into ESG bond funds in the first five months of 2021 compared to $68bn invested for all of 2020, according to a report by the Financial Times.
But despite more organisations and investors paying closer attention to the ESG space, data challenges around availability and quality remain, says Diane Eshleman, head of Americas at consultancy firm Delta Capita.
“The data is sometimes really hard to collect and it's hard to know what the right benchmark is," says Eshleman. “There's no standard and so the biggest challenge is really around collecting the data in a way that is credible and consistent."
Samuel Rundle, head of financial market investments at Ingka Investments – one of the three core businesses of Ingka Group, the largest owner and operator of IKEA Retail, added that a lack of transparency and the reporting of ESG data is causing issues for investors.
According to Schroders' latest Institutional Investor Study, “greenwashing" continues to be a major issue for investors, with 59 percent of survey respondents highlighting it as the most significant obstacle to investing sustainably.
“Definitions and concepts are not clear, so when different companies talk about being net-zero, their concept can be quite different," Rundle said in an email. “Any regulation and development of reporting standards will help these challenges."
The discrepancy among ESG and sustainability reporting standards is creating issues for organisations and at times, can be “quite overwhelming", says Rebecca Self, director of sustainable finance at South Pole. “It can create a bit of a barrier [when] there are so many different initiatives." Harmonisation and consistency among standards are important but there will still be some different “national or jurisdictional flavours with ESG," says Self......
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