Why do investors care about sustainability?

• In the last three years, there’s been a lot of action around sustainability.
• But why are investors asking more questions? 
  • Moral imperative – lots of investors understand that to have any society in the next 50 years corporate sustainable practices are essential.
  • Marketing benefit.
  • Looking at sustainability as a strategic lens – investors checking how robust corporates will be from the transition period towards change.
• Sillion’s interviews with investors highlight:
  • ESG in investing has survived major challenges.
  • Disclosure frameworks and investor expectations are aligning – everyone is getting on the same page in terms of how they should be reporting.
  • Quantifying impacts of the transition to sustainability growing in importance.
  • Some investor regulations are having a real impact (SFDR).
  • Pressure for action on boards and executives coming sooner than expected.
• Areas with more focus on for investment this year and into 2024 include:
  • Scrutiny of scope 3 emissions.
  • SBTi verification.
  • CDP/self-reporting.
  • ESG assurance
  • Social factors and impact.
  • Nature and biodiversity.
• Timelines to action:
  • Many corporates have started setting commitments for 2026.
  • Investors will start asking questions if corporates haven’t started setting commitments by 2026/27.
  • Responsibility is falling faster on executives to set commitments than was originally anticipated.
• Main issues identified with investors in Sillion’s interviews::
  • TCFD – Task Force for Financial Disclosures.
    • Near universal update in the UK.
    • Seen as a proxy for ESG sophistication and an indicator of good strategic management.
    • Upcoming focus on remuneration.
  • ISSB – International Sustainability Standards Board.
    • Final standards published at the end of June 2023 with significant uptake expected. Can be implemented globally. 
    • Investors are optimistic about comparable and cross-border applications.
    • Some consolidation challenges are expected globally but universal uptake may take time.
    • For accounting periods from 1 June 2024 you’ll be required to include ISSB in your reports.
  • TPT – Transition Plan Taskforce.
    • Aligns with TCFD and ISSB and fills the gap between commitment and action. 
    • Requires standalone transition plans every three years and to be updated annually.
    • A really important piece of disclosure if we’re committing to decarbonisation targets.
    • Both quality and content have real potential to affect company valuations.
  • Quantifying impacts.
    • Central strategic tools, quantifying risks and opportunities from climate transition.
    • Central to TCFD, ISSB and soon TPT, required to be reported annually.
  • SFDR – Sustainable Finance Disclosures Regulation.

• Real uptake across buy-side inside and outside EU.

• Reporting tips for this year:
  • Get the basics right and start thinking of ISSB as soon as possible.
  • Prepare early for ongoing quantitative requirements – it’s a long process and can take a year or two to get good at it.
  • Develop a costed transition plan to prepare for TPT.
  • Consider your SFDR and SDR investment case and register.
  • Start to think about how your investors are thinking about sustainability.
  • Remember the sustainability report is a reporting document so it should be concise and investors should have easy access to the information they require.

How is changing ESG regulation altering investor activity now and into 2024? This webinar is for you if you want to stay relevant in a changing business landscape. Sillion have been at the frontline interviewing investors in recent months and, along with ongoing research, want to share current thinking

During this webinar get a clearer understanding of:

– The latest regulatory changes with ISSB, Transition Plan Taskforce, TCFD, SFDR/SDR and EU Taxonomy.

– Changing investor expectations.

– What boards and organisations need to focus on this year and beyond.

Tom has over 15 years experience in capital markets communication and reputational management, primarily across sustainability, financial, and cleantech sectors. He has advised on a wide range of clients throughout his career, from FTSE100 to governments at boardroom level, encompassing a range of scenarios including IPOs, crisis communications, purposeful narrative, and industrial engagement.