The last year is very likely to be remembered as a year of unfulfilled potential and missed opportunities when it comes to ESG investing. RBC BlueBay Asset Management in its ESG Outlook 2023 report looks at the key themes and trends for the new year.
“2023 will be another busy and challenging year in the ESG/RI (responsible investing) world. The many tailwinds in play as 2022 ended, will continue into, and some deepen this year. This makes the outlook challenging economically and when it comes to all things ESG,” writes My-Linh Ngo, Head of ESG Investment, Portfolio Manager, RBC BlueBay Asset Management.
The asset manager lists eight themes when it comes to the ESG outlook for 2023. RBC BlueBay says that the world needs to refocus its attention on climate change and COP28 will need to be a direct trigger for raised ambition for governments. “Reform and advancement of carbon markets will be critical to enable different actors to fully leverage the full range of climate solutions in a credible way,” says Ngo.
Next up is the recognition of nature and biodiversity as systemic risks and their connection to climate change. RBC BlueBay says that investors should expect companies, financial institutions and governments to take more steps at conserving nature and biodiversity.
RBC BlueBay also sees the cost of living crisis increase social and political unrest which could make it difficult for government and policymakers to take key decisions.
Meanwhile, ESG regulation is getting more technical, detailed and complex, but still lacks clarity on whether it will deliver results. “Getting the balance right in terms of being principles based or prescriptive is proving difficult, and risks being divisive at a time when the industry should be coming together,” as per RBC BlueBay.
Some other themes that the asset manager discussed in its ESG Outlook are the increasing focus on stewardship activities, the importance of ESG reputation and performance, real-world outcomes and ESG investing becoming mainstream.
“We believe that ESG considerations continue to be an important driver of long-term investment returns,” as per Ngo.
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