Biodiversity, just transition and regulation are the leading ESG themes for 2022, according to Rathbone Greenbank Investments.
Kate Elliot, head of ethical, sustainable and impact research at Greenbank, says biodiversity currently languishes some 10-15 years behind that of climate change but warns that a lack of action poses huge challenges for the planet.
Elliot explains: “Biodiversity is an issue which Greenbank has been championing for many years. Biodiversity is a key issue for the food industry and in August last year we led a coalition of investors and NGOs urging the government to demonstrate clear leadership and ambition in its response to the National Food Strategy’s recommendations for promoting a healthier and more sustainable food system in the UK.
“The food system is a major driver of climate change and biodiversity loss. At the same time, incidences of obesity – a key risk factor in cases of severe Covid-19 – are rising across the world and awareness is growing of labour rights concerns in global good chains. This is an area we intend to focus on again strongly in 2022.”
Climate change dominated the headlines in 2021, but Elliot says the focus must be upon where climate change and social factors interconnect, ensuring that the transition to net zero remains fair for everyone.
Elliot says: “The UK’s commitment to a net zero economy carried with it the potential to create large numbers of new jobs as new industries emerge and existing industries expand to replace products and processes that become obsolete as we adapt to new low carbon innovations, regulations and consumer preferences.
“While the analysis is specific to the UK economy as our chosen case study, our recommendations for investors are relevant at global, national and local levels and this is an area we plan to continue to champion in 2022.”
In addition, Greenbank expects regulation to be core to ESG over the next 12 months, with some important milestones reached in 2021 and more to come this year.
Regulatory changes made so far include the formation of the International Sustainability Standards Board to develop a global baseline of high-quality sustainability disclosure standards for investors and the Sustainability Disclosure Requirements (SDR), which will create an integrated framework for disclosures on sustainability across the economy.
Alongside the SDR, certain investment products will be required to display a label reflecting their sustainability characteristics by the FCA. The SDR will also include disclosure requirements relating to the forthcoming UK Green Taxonomy, which will provide a common framework setting the bar for investments that can be defined as environmentally sustainable.
Elliot adds: “Of course, this is just a fraction of the plethora of regulation around ESG which is currently under consideration or action. The standardisation of data is key; both the data which investors are presented with and the data and information that they and other providers offer the wider public.
“A common taxonomy is central to ensuring investors understand and can compare the sustainability objectives of different products and services. However it’s vital that the bar is not set too low, allowing in unsustainable activities and undermining trust in the standard.”
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