Key ESG Developments Missed In 2022
For those looking back over last year’s ESG developments, ‘underwhelming’ may be a fitting description for them. That was certainly the case when we consider some of last year's major events, as well as COP27. However, one could argue that it is not all doom and gloom and that there are many bright spots.
Some key developments could continue to set the tone for the rest of this year, as more issues continue to come to light and the movement develops. Some possible outcomes come in the form of the following.
ESG Funds Show Stability
Even with political pushback on ESG and sustainable investing being scrutinised, the markets were stable. ESG mutual funds slowed down but were still positive, and the SPDR S&P 500 ESG Fund performed in line with broad market funds. From an investing standpoint, this shows promise, as this market can hold on its own quite well despite the shift in philosophy.
Better yet, the flow of ESG funds held up relatively well when compared to broad market funds. This further reinforces that ESG ideology can lead to stronger profits in the future.
Across multiple countries like the US and the UK, working for companies has started to become more of an issue, and people are starting to take action. Whether it’s Starbucks employees unionising or rail workers in the UK going on strike, these actions bring light to something bigger.
How should employees be treated by those at the top?
Unions are a solid answer for much larger organisations to make far-sweeping changes. But these movements, which will surely continue well into this year, continue to enforce that those at the top need those at the bottom and should be more mindful about looking after them.
We see a lot of this in big tech these days, as these companies are slowly turning into monopolies. There has been some pushback through regulations, but the biggest push is coming from the people within those organisations. Prime examples of this defiance were from Meta employees not using the Metaverse to Twitter employees leaving after Elon Musk’s "extremely hardcore" Twitter message.
We're already seeing small changes, with businesses and governments incentivising greener alternatives in general. But the green ambition runs much deeper as other problems continue to emerge. For one thing, as technology advances, more and different types of waste emerge.
Just as with food waste and plastic waste, we’re well aware that technology waste can end up affecting us just as much too. In fact, manufacturers know that as technology ramps up, more of that waste can end up polluting soils or other ecosystems near their place of business too.
Mitigating waste moving forward is ideal, and companies have been steadily making those changes. In the case of technology, it’s been about reducing the impact of waste on core components. Manufacturers are collaborating, using eco-friendly design principles, and funnelling more recycling of components and raw materials to be re-manufactured into something else.
More Connectivity In Social Issues
Despite the political backlash in the Western hemisphere over ESG, there is a steady number of people showing concerns about working conditions as well as government action. People are beginning to ask more about what their government is doing to improve their lives, and they are distributing power based on that.
The United Nations performed a study recently and found that people think connectivity is the biggest factor in development. Connectivity in the form of better education, remote learning, healthcare through the telephone, and other key areas.
This much is clearer in Western cultures where healthcare in Canada is being steadily undermined or where books are being banned in public schools in the US. With these being threatened on a daily basis, there is bound to be increased concern about these issues.
Lastly, companies will have a tougher time hiding how they function and their impact on the world. To start, the IFRS Foundation has created its own sustainability reporting standards. Combined with the EU’s formation of the Corporate Sustainability Reporting Directive reporting standards, companies will be forced into being more transparent about their business behaviour.
It’s hard to say whether individual countries will be rolling out their own reporting standards this year, but we can expect a more international and collaborative focus on transparency in supply chains and finance.
Even though these developments may be small and are overshadowed by some of the bigger events, they are still crucial. One thing that is clear is that a lot of change is happening around the world, and these issues are getting more public attention. Follow more opinion on ESG issues via our Featured Articles.