Frankfurt It’s actually about doing good. But hardly any other topic is currently causing such great controversy in the financial industry as the three letters ESG. The abbreviation stands for investments and corporate strategies that meet ecological, social and ethical standards. A current survey by the major British bank HSBC among 2000 companies and major investors active in the capital market worldwide shows that it is not only the topic of sustainability that has finally arrived in the economic mainstream, but also the fear of abuse.
Especially among US investors, there is a widespread fear that companies will present their sustainability commitment in a much more positive way than it actually is. Around 65 percent of the US investors surveyed consider “greenwashing” to be a serious problem. In Asia it is around 20 percent, while in Europe the comparative value is well below five percent.
One trigger for this discussion is the criticism of the former head of sustainability of the German fund company DWS of her ex-employer. After her dismissal, Desiree Fixler went public with the accusation that the Deutsche Bank subsidiary had systematically presented its ESG commitment too positively.
Another insider also criticized the financial industry’s handling of the issue. Tariq Fancy, head of sustainable investments at fund company Blackrock until 2019, believes that green finance is just a “social placebo” and that the only beneficiaries are finance firms who would benefit from higher fees.
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It is also the investors from the USA who exert the greatest pressure on companies to say goodbye to environmentally harmful and socially unfriendly activities. Around 80 percent of large US investors stated in the study that ESG issues are very important to them. In Europe, on the other hand, this only applies to around 40 percent.
For about 60 percent of US investors, it is very important that the companies whose securities they buy adapt to the consequences of climate change. The same attitude is found in only around 25 percent of Europeans. This result should actually be an alarm signal for the European financial sector.
Because the topic of sustainability has so far been one of the few areas in which Europeans have been able to get a head start on Wall Street. Regardless of whether it is about surveys on the greenest financial centers in the world or analyzes that examine which stock exchanges the most sustainable companies are listed on. So far, Europe has been one step ahead everywhere. However, the results of the HSBC survey now suggest that Americans have recognized the importance of the topic and are catching up.
It’s about a gigantic market. ESG investments crossed the $ 2 trillion mark worldwide in the second quarter of this year. This means that sustainable investments have almost tripled in three years. Deutsche Bank boss Christian Sewing sees the topic as one of the greatest growth opportunities for decades and even believes that this megatrend will divide winners and losers in the banking sector.
Companies want to get out of dirty business
According to the HSBC survey, 94 percent of all companies surveyed want to shut down activities that damage the environment or are socially incompatible in the next five years. However, the extent of this change is likely to vary widely.
After all, around 30 percent of those surveyed expect substantial changes, another 30 percent expect at least noticeable changes, the rest of those willing to change see only slight pressure to reform.
Companies are not only responding to pressure from investors and regulators, they are also hoping for economic benefits. More than half of the respondents think that a stronger commitment to sustainability will also pay off economically, either through higher returns or lower risks.
This is the highest poll value in three years and a significant increase compared to the 39 percent from last year. Conversely, only 25 percent of major global investors fear that sustainable investments will depress returns. Last year it was 31 percent.
Companies are feeling the effects of climate change
But it is not just economic reasons that cause a change of heart. More than 60 percent of the companies and investors surveyed said that their attitude towards their own responsibility towards society had changed, with the corona pandemic playing a key role for three quarters.
But there is another reason for the increased ESG awareness in business. Around half of the companies surveyed are already feeling the effects of climate change themselves. This is the highest poll number in three years, and significantly more than the 37 percent from the previous year. Another 30 percent assume that global warming will affect their business in the medium term. Only one percent believe that will never be the case.
More: Rip Off With Pseudo Green Investments: How Investors Are Cheated