With many businesses struggling to stay afloat through the Covid-19 pandemic, what has happened to their sustainability ambitions? Rather than taking a backseat, an ING survey of corporate and investment leaders found that companies have actually accelerated their green transformation plans, and investors are demanding harder environmental targets.
Looking back, 2020 was a wake-up call for corporates, investors and governments alike. Not only were they dealing with the impact of lockdowns, supply chain disruptions and loss of business, but the year was also marked by social unrest and extreme weather events – systematic risks that could have been foreseen. To prevent this from happening in the future, it's imperative to move even faster and further on sustainability initiatives.
There must be greater transparency about progress and performance and stronger accountability to ensure commitments are met.
ING questioned 450 companies in seven sectors and 100 institutional investors about their environmental, social and governance priorities, how they are embedding accountability and the evolving influence of capital markets on sustainable transition.
The findings are published in a report titled 'Now or never: A new bar for sustainability', which was compiled in partnership with Financial Times company Longitude.
The headline findings
- The bar is being raised: Covid-19 is a great accelerator of climate action. The majority of corporates (57%) say they are now accelerating green transformation plans. Investors too want to see companies put more hard environmental targets in place.
- Employee wellbeing is the most urgent ESG priority for 2021. A third of corporates (33%) put the health and wellbeing of their employees first, even above emissions reduction (30%). It's also a top ESG priority for investors, behind only climate and sustainable supply chains.
- Ambition and accountability are under the microscope like never before. Investors want more transparency on companies' sustainability targets: 72% of investors say they are increasing their ambitions when it comes to ESG outcomes in their portfolios.
- Greater government intervention is expected in some markets, which may intensify climate transition risk. The majority (61%) of companies in the energy sector expect new government policy action, such as carbon taxes, which could accelerate climate transition risk. The highest impact on companies' sustainability plans is expected in the US under the new administration.
- Sustainable finance is boosting accountability and investors say it will accelerate transition. Nearly three-quarters (73%) of companies say sustainable finance instruments such as green bonds or sustainability-linked loans, have improved their ability to put in place robust internal accountability metrics. And 48% of investors think sustainable finance will be more effective in driving the transition of carbon-intensive companies; just 26% disagree.