ESG Integration Deepens Despite Economic Headwinds

In an era where the resilience of the Environmental, Social, and Governance (ESG) framework faces challenges, the inaugural ESG Market Navigator survey by Bloomberg Intelligence underscores the enduring significance of ESG in both financial markets and corporate strategies.

Global regulations, consumer demands, and competitive aspirations continue to propel ESG forward, according to insights gathered from 250 C-suite executives and 250 investors worldwide in collaboration with Bloomberg New Economy.

While short-term shifts in priorities may be influenced by geopolitical risks and macro concerns, the survey reveals a robust, long-term commitment to ESG from senior executives and major investors globally.

Despite only 55% of C-suite executives currently ranking ESG among their top two priorities, a resounding 85% of surveyed investors and companies express intentions to increase ESG investments over the next five years.

Despite acknowledged challenges such as transition costs and regulatory compliance, executives perceive ESG as a boon to reputation, capital access, and competitiveness.

A substantial 84% assert that ESG contributes to a more resilient corporate strategy. The survey further highlights that 84% of respondents view ESG as a material factor in M&A, and 81% express concerns about losing market share if they lag behind peers.

Notably, 70% of executives recognise energy-transition efforts as a competitive advantage, with 75% acknowledging the risk of revenue loss and activism due to inadequate planning. Despite challenges in articulating ESG goals, 73% believe the associated benefits are worth the commitment and scrutiny, even as "greenwashing" complicates the narrative.

Similarly, the majority of investors (85%) contend that ESG correlates with superior returns, fortified portfolios, and enhanced fundamental analysis. Despite challenges in data consistency and funds regulation, 90% of all respondents foresee ESG driving better returns over the next 12 months compared to the broader market. Additionally, 92% believe ESG contributes to a more resilient investment portfolio strategy, and 86% deem it crucial for attracting and retaining clients.

Adeline Diab, Global ESG Research and Strategy Director at Bloomberg Intelligence, predicts that 2024 will usher in an era of ESG accountability, emphasising the pivotal role of investor-corporate dialogue. The survey indicates that 60% of investors hold companies accountable for ESG, while 40% of executives field ESG-related queries on over half their investor calls. Diab underscores the importance of scrutiny in shaping a more credible ESG market over time.

Other notable survey findings include overwhelming support for Artificial Intelligence (AI) within the ESG context, with 90% of executives and investors considering AI a 'friend not foe.'

AI is perceived as instrumental in improving traceability, enhancing data quality, and uncovering controversies across languages. Key priorities for 2024 include regulatory interoperability (15%) and climate risk assessments (12%) for investors, while impact measurement and litigation risks dominate corporate concerns. Additionally, emerging themes encompass water, circular economy, and biodiversity alongside the traditional focus on clean energy.

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Source: Bloomberg