December 9, 2021(MLN): Investors, regulators and stakeholders in capital markets are paying increasing attention to social issues and this Environmental, Social and Governance (ESG) theme will rise in prominence over 2022, Sustainable Fitch says in a new report.
In conjunction, the nexus between environmental and social issues will become stronger as ESG integration becomes more sophisticated as more disclosures and data become available, the report noted.
This can manifest in various ways, be it greater importance placed on just transition issues and the impact of investment strategies, supply-chain evaluations, or the issuance of sustainability bonds that include social and environmental goals.
The research expects to see a rising level of issuance of sustainability and sustainability-linked debt issued in 2022 as investors combine climate and social objectives under single mandates. The release of the EU’s draft Social Taxonomy in 2022 will reflect a growing demand to consider the ‘S’ in ESG integration and evaluation, and a need for guidance on how to capture and address wide-ranging social issues.
The growing importance of social issues for investors can be seen in a number of ways, including increasing emphasis on how investment strategies affect financing a low-carbon economy and at-risk populations and further examining supply-chain issues, in addition to more issuance of sustainability bonds.
The report stated that the issuance of social and sustainability bonds nearly tripled to over $250 billion in 2020 when compared to the previous year, spurred by government pandemic bonds to provide social support to industries and workers affected by lockdown restrictions. On the other hand, the green market bond witnessed an 8% growth in the same period.
Of significant importance to investors and reporting entities in 2022 will be the new ESG disclosures that can affect a plethora of market participants and jurisdictions, bringing consistency and harmonization, it added.
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