Energy News Beat Publishers Note: We are seeing this trend around the world with ESG investing. In fact we are working with a group on the ESG standardization in the US. A tough process as accountability is only one portion of ESG, and proving compliance is even tougher. This is a great change for the Energy industry.
Fitch Ratings-London/Hong Kong-15 January 2021: Sustainability considerations are increasingly being incorporated into policies, corporate governance frameworks, and the lending and investment decisions of financial institutions. This will increase the influence of ESG on company strategy, financing and operating environments in 2021, Fitch Ratings says in a new report.
Fitch has identified five key ESG trends for 2021 that are relevant to credit ratings.
We believe the quality and quantity of ESG data will be improved by increasing reporting requirements and harmonisation of standards. This will spur financial institutions to enhance ESG due diligence and exclusionary policies to cover a broader set of ESG issues and entities, further affecting financing conditions for issuers.
We expect the sustainable market to soon incorporate labels such as “social” and “transition”, as well as “green”. Access to more sectors and asset classes will be widened by innovation. Greater policy incentives may cause ESG instruments to create a more meaningful difference in financing costs for issuers as regulations formalise the market.
There were many net-zero emissions pledges from companies and governments in 2020, but how these will be achieved is unclear. We expect more detail in 2021. The policy paths will provide insight into long-term economic effects.
We expect the social effects of the coronavirus pandemic, such as greater inequality and poverty, to lead to societal tensions. The policies designed to alleviate them may lead to new social risks for issuers, and could exacerbate existing risks.
The growing interest in sustainability is sparking debate on how corporate governance frameworks should foster long-term responsible corporate behaviour. Combined with more active investor ownership and the formalising of sustainability targets into remuneration and sustainability-linked instruments, we expect ESG issues to increasingly influence strategic and management decisions.
Further information on Fitch’s ESG Relevance Scores and research can be found at https://www.fitchratings.com/site/esg
Contact:
Mervyn Tang
Senior Director, Sustainable Finance
+852 2263 9633
Fitch (Hong Kong) Limited
19/F Man Yee Building
68 Des Voeux Road Central, Hong Kong\
