Capital market participants are attaching greater importance to sustainable finance than a year ago, even as issuers and investors have had to navigate unprecedented challenges due to the COVID-19 pandemic(HSBC ).
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More than half of investors and three-quarters of issuers say the pandemic has either reinforced their commitment to Environment, Social and Governance (ESG) or made them realise they had paid too little attention to the social component of ESG, according to the HSBC Sustainable Financing and Investing Survey 2020(opens in new window). Of the 2,000 respondents (half investors; half issuers), more than 90% said ESG was important or very important.
Unsurprisingly, market volatility in 2020 has had an impact, particularly for investors who are now more focused on risk and returns. Investors’ opinion of the importance of the environmental and social components of ESG stands at 86%, down slightly from 94% last year. And a small proportion have even temporarily sidelined their focus on ESG issues.
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Among issuers, however, the commitment to ESG has become stronger, with a higher proportion now viewing E&S as very important: 62 per cent, up from 58 per cent last year. Overall, 93 per cent of issuers see environment- and social-linked financing as important, unchanged from last year.
Perhaps in a demonstration of mainstream nuances, the Survey tells us that risk/return and external pressures are now more influential than values in pushing investors towards sustainability awareness: 49% cite risk/return, 43% society’s expectations and 41% regulators.
“Sustainable finance has moved into the mainstream of the capital markets faster than we expected, and as that happens, ESG deals are increasingly being judged as a traditional asset rather than a reflection of commitment to social and environmental issues,” said Daniel Klier, global head of sustainable finance, HSBC. “This is an optimistic development, as ultimately the long-term success of the market will be shaped by the ability of ESG investments to compete with other traditional options on risk and return.”
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