Originally published 3.18.2021
2020 is the year that changed the world forever, touching the lives of every single person on earth. Yet, as the pandemic exposed our economic, institutional, and social vulnerabilities, we have recognized that we are all interconnected and share a mutual responsibility toward driving positive change towards ESG investing. The acceleration of ESG investing has been unprecedented, evidenced by the record inflows that poured into sustainable funds throughout 2020 and the research by Blackrock highlighting the on-par ( and in many cases outperformance) of the ESG indices in comparison with traditional indices with comparable volatility.
As we continue to make extraordinary progress in ESG investing, it’s critical to ensure that we rebuild our societies and economies upon foundations firmly built on an ESG approach that is integrated and intentional, which expands to an integrated approach to active ownership, as close investor engagement with corporate boards will continue to hold firms accountable for accurate ESG disclosures.
2021 will see the rise of the focus on the ‘S’ in ESG, as the pandemic not only continues to lay bare the most vulnerable aspects of our societies, but highlights the urgent need for increased transparency and accountability within organizational value structures. This in turn results in higher standards of corporate governance which increases access to ‘S’ related to a firm’s workforce and productive efficiency. In order to ensure ESG transparency, clear performance indicators created by better ESG data will be enabled by spatial finance- the integration of geospatial data into financial reporting. Spatial finance, with its combination of remote sensing AI and earth observation, has enormous potential to provide valuable insights across the ESG investment universe, in addition to providing a next generation framework to assess impact measurement and risk management.
ESG as the driver of value creation ensures corporate resilience as it becomes increasingly backed by governmental and regulatory support. As global recognition and consensus of the systemic risk of climate change, increased ESG integration into investment decisions by both institutional and retail investors alike, and the demand for ESG transparency increases, ESG investing will continue to be solidified as the future of investment.