Investors, regulators, and stakeholders in capital markets are paying increasing attention to social issues and this ESG theme will rise in prominence over 2022, Sustainable Fitch says in a new report. In conjunction, the nexus between environmental and social issues will become stronger as ESG integration becomes more sophisticated as more disclosures and data become available.
This can manifest in various ways, be it greater importance placed on just transition issues and the impact of investment strategies, supply-chain evaluations, or the issuance of sustainability bonds that include social and environmental goals.
Fitch, expects to see a rising level of issuance of sustainability and sustainability-linked debt as investors combine climate and social objectives under single mandates. The release of the EU’s draft Social Taxonomy in 2022 will reflect a growing demand to consider the ‘S’ in ESG integration and evaluation, and a need for guidance on how to capture and address wide-ranging social issues.
At the core of the social and environmental nexus is the issue of financing a just transition to a low-carbon economy for populations most at risk from adverse socioeconomic impacts. Related to this is the focus on the emerging market financing gap at COP26 and ways to incentivise lending for mitigation and adaptation projects.
Of significant importance to investors and reporting entities in 2022 will be the new ESG disclosures that can affect a plethora of market participants and jurisdictions, bringing nuch need consistency and harmonisation.
Areas to watch are the development of the ISSB under the auspices of the IFRS, the updated climate risk disclosures from the US SEC and work in the EU on the SFRD regulatory technical standards.
