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MSCI releases “2020 ESG trends to watch”

MSCI has release a report entitled the “2020 ESG trends to watch”. The report highlights the five trends the firm believes will unfold in 2020 to catapult ESG investing into the new decade.

The first trend draws attention to Climate change innovators, highlighting the potential in “spotting the sleeping giants.” Solving the climate crisis is likely to take innovative technology, scalable deployment and a bit of luck. Many envision climate saviours coming in the form of plucky start-ups. But alternative data is hinting instead at big, established players, biding their time and quietly assembling an arsenal of climate solutions. In 2020, MSCI predicts, investors will turbocharge their use of alternative data to spot the companies plotting to take a lead in propelling the world toward a carbon-free economy.

The second trend discusses the “New terms for capital,” describing the fact that EGS factors are on the rise and cannot be ignored. Banks have stepped away from some gun makers, and investors have been keen to channel money toward green energy projects. But for the average, middle-of-the-road company, ESG has mostly been tossed to the corporate social responsibility office or used to prettify annual reports.

MSCI has predicted that in 2020, ESG will storm the CFO’s office, elbowing its way onto the bottom line as financiers get creative with ways to bind ESG criteria to their terms of capital, introducing a plethora of corporate borrowers into the wide world of ESG.

The third trend predicted by MSCI draws attention to the re-evaluation of real estate investment in the face of the increasing prominence of natural disasters, and these events’ impact on the asset class.

Wildfires, storms, floods, droughts, heat waves…. Just as real estate investors and managers begin to grapple with what climate change might do to their assets physically, now they may also have to contend with accelerating regulation. Location matters in real estate, and vast portions of the global property stock are in cities and regions marching toward zero-carbon building standards.

In 2020, says MSCI, greening the property portfolio will move from a nice-to-have reputation-booster to an imperative in the face of a looming “brown discount” if real estate investors don’t kickstart their journey to zero carbon.

The fourth prediction brought forward in the MSCI report is the struggle to revolutionise the skills of firms’ workforces, as old skills become redundant in an increasingly digital era. The trick is “How?” to instigate this change - Workers aren’t the only ones needing disparate new skills – HR and management likely do too.

In 2020, many more companies will have to become human capital multi-taskers, laying off some workers while simultaneously recruiting scarce new kinds of talent that may seem alien to management, according to MSCI. Like a high wire juggling act, any lapse could prove disastrous.

The fifth topic of discussion highlighted on MSCI’s 2020 horizon is that of accountability; stakeholders are hot right now, but glossy mission statements have done little to shift the enduring power dynamic between companies, shareholders and other stakeholders.

Until now, only shareholders have had clear channels for holding companies to account. Bit by bit, other stakeholders are trying to influence the conversation.

In their prediction for 2020, MSCI suggests that stakeholders without proxy cards will evolve their activism, joining forces with willing shareholders and using increasingly sophisticated means to size up whether companies really “walk the talk” when it comes to their stakeholder commitments.

More information on MSIC’s “2020 ESG trends to watch” can be found HERE.