ESG is spreading, requires action today
Decision-makers must increasingly integrate ESG (environmental, social and governance) factors into their portfolios. However, to ensure sustainable and responsible investment, action must be taken on the part of stakeholders at all levels: asset owners, financial institutions, wealth managers and government. These were the most important messages from the first V4 ESG virtual conference organized by the Hungarian Business Leaders Forum (HBLF).
The mission of the April 27 event, which featured Budapest Business Journal editor Robin Marshall as master of ceremonies, was to bring together global and regional ESG leaders and change actors from the private and public sectors to a one-day online conference. to shed light on the most pressing challenges and opportunities presented by world-class ESG investing approaches.
Opened by Zsolt Jamniczky, President of HBLF and Board Member of E.ON Hungária Zrt., The conference brought together nearly 40 world-renowned ESG experts.
In his presentation, Rémy Briand, Managing Director of the investment research firm MSCI, drew attention to the fact that the net zero revolution is not only a necessity, but also an opportunity for companies and investors. .
Among future expectations, he highlighted the COP 26 United Nations Climate Change Conference, to be held in Glasgow in November, announcing several newcomers to the mandatory reports of the Climate Related Financial Disclosures (TCFD) Working Group, new emission reduction targets set requirements for climate stress tests for central banks.
According to Briand, the transition will depend heavily on the critical role of technology and alternative data. As asset owners embrace new benchmarks, large financial institutions will face shifting stakeholder preferences, he warned.
BlackRock Switzerland Managing Director Mirjam Staub-Bisang told the online audience that the growth of sustainable investing exceeds asset management (AM) over time. In 2020, the total growth of AF was
only 5% against 27.3% in sustainable investment, generating 5.5 times higher development. She also said that the biggest challenges in adopting sustainable investing remain ESG data and analysis.
The poor quality and availability of these remain major obstacles for stakeholders in almost all regions. According to her, the most important societal cornerstones for success are the exchange of fossil fuels for renewable energies, the adoption of new lifestyles and the extraction of greenhouse gases.
Janson Channell, Managing Director of Citi Global Insights, gave a comprehensive overview of how the nature of risk has been changed both by globalization and by human and economic impacts. He explained that climate change provides a perfect example of the links between systemic risks and its ecosystem.
He highlighted the growing importance of supply chains, as companies are often judged on sustainability metrics across the supply chain and downstream of their operations.
“However [much] progress and pace differ by asset class and geography, ESG investing is now common. Sustainable finance is simply a matter of risk, opportunity, pricing and allocation of capital and, therefore, it is fundamental to financial markets, and it is here to stay, ”he said in his opening speech.
David Radermacher, vice president for sustainability and climate at grid operator E.ON, confirmed that tackling climate change requires massive investments. According to him, ESG provides focus and stimulates innovation and new technologies.
E.ON has implemented ESG globally to capture the growth resulting from the collective fight against the climate crisis. He believes the business approach creates long-term values through diversity, human rights, community involvement, health and safety and the efficient use of resources. Strong ESG performance reflected in ESG ratings creates transparency and is rewarded by investors, he added.
Alastair Teare, managing partner of Deloitte Central Europe, said ESG is now at the heart of any investment portfolio, with increasing activity from regulators, consumers and employers. The sector is characterized by a lot of information but little standardization, according to him. He stressed that a solid methodology and well-defined risk management are needed.
“We are at the tipping point. Sustainability and broader ESG skills are essential skills required in all areas of business, ”he said, adding that there are several ways to approach ESG, ranging from compliance considerations to full assessment.
“The winners in this market will be those who can articulate their ESG policy and position their products early to take advantage of the growing market interest,” said Teare.
The last keynote speaker for the morning was Robert Adamczyk, Senior Environmental Advisor of the European Bank for Reconstruction and Development (EBRD). He explained how the EBRD approaches ESG, giving an overview of the environmental and sustainability architecture of the European Union.
The bank’s action plan on sustainable finance, as well as its new strategies, are based on the so-called European Green Accord, a cross-sectoral plan to make Europe climate neutral by 2050, and the new EU climate law which aims to put the fight against climate change at the heart of EU policy making.
As a lender, the EBRD’s financial legislation incorporates a Non-Financial Reporting Directive (NFRD) establishing the rules for the disclosure of non-financial and diversity information by large companies, as well as the taxonomy of the EU, the establishment of an activity list, and finally the EU Sustainable Finance Disclosure Regulation (SFDR), which offers greater transparency on the sustainability of financial products.
For the afternoon, the conference created a platform for successful moderated panel discussions, bringing together leading experts from the region to share their experiences with professional peers. Topics covered the latest likely trends in regional and global stock market operations and academic research, as well as best practices and business strategies on climate risk in investments.
The event even provided content during lunch and coffee breaks. In various sub-committee rooms, champagnes from the Kreinbacher cellar were presented (with the possibility of “winning sparkling if you play the quiz”), and there was a chance to meet Damion Rallis and Matt Moscard of Free Float Media and discuss the topics and latest trends in their podcasts.
The conference brought together 38 speakers, moderators and panelists, it had some 50 cooperating partners and it attracted 200 participants from 60 companies, including 40 students and researchers who were granted free access.
It was also the first ESG conference hosted by HBLF and the first time it sought to cross borders and cover V4 (which includes the Czech Republic, Poland and Slovakia as well as Hungary) and the region. The hope is that this will become an annual conference.
This article first appeared in the print issue of the Budapest Business Journal on May 7, 2021.