The world of environmental, social and governance (ESG) reporting and investing has ramped up significantly over the past couple years, even more so during 2020, when social risks and reporting became front and center for many companies and investors. Combine that with the growth of related finance products and services — sustainability-linked loans and bonds — and you can find sustainability sitting squarely on Wall Street.
We call it GreenFin, our portmanteau for "green finance." It may well be the most dynamic and impactful aspect of sustainable business today.
Which is why GreenBiz Group is pleased to announce GreenFin 21, the launch of a new annual event, virtual for now, taking place April 13-14. GreenFin will join our other annual event brands — GreenBiz, Circularity and VERGE — on the sustainability conference calendar.
For all the sustainability reporting that companies serve up each year, it doesn’t always represent the kinds of data that investors need to assess corporate risk and opportunity.
GreenFin 21 is the natural evolution of the GreenFin Summits we ran at our GreenBiz conferences in 2019 and 2020. There, we convened a small group of professionals (100 in 2019, 200 in 2020) representing the ESG and sustainable finance ecosystem: corporate reporters (including those in sustainability, investor relations and corporate finance roles); institutional investors and pension funds; ESG rating and ranking organizations; and financial institutions, notably the world’s largest banks.
Tower of Babel
What spurred us to launch the summits back in 2019 was the realization that these parties weren’t always speaking the same language or understanding one another’s needs.
For example, for all the sustainability reporting that companies serve up each year, it doesn’t always represent the kinds of data that investors need to assess corporate risk and opportunity. For their part, investors may not be asking the questions companies most want to answer. And neither side may fully understand how various parties are using this fast-growing cache of data.
At the 2019 and 2020 summits, our goal was to have a candid conversation in a safe space to address this financial Tower of Babel. Based on the enthusiastic feedback we received, we succeeded.
GreenFin 21 will build on that success, adding in the rapidly evolving world of sustainable finance products and services, to share what’s working, what can work better, and the path forward.
It’s no small matter. ESG, as we’ve noted, has been one of investing’s bright spots in 2020, with tens of billions of dollars flowing into ESG-themed funds every quarter. According to Morningstar, ESG funds reached the $1 trillion milestone sometime during the second quarter of the year. Much of the action is taking place in Europe, where PwC predicted that ESG funds — "a central tenet of the investment landscape" — could outpace traditional funds by 2025. U.S. investors, for their part, are catching up.
So, too, the growth of ESG-related bonds and loans. Corporate bond offerings focusing on sustainability and social issues are growing each quarter, and there’s a burgeoning market for loans linked to a company’s ESG performance or other sustainability metrics. As we reported recently, global green bond issuance shot past the $1 trillion mark in September.
Still, there’s massive room for growth. Fully 96 percent of U.S. institutional investors, and 91 percent across six global markets, expect their firm to increase prioritization of ESG as an investment criterion, according to a recent Edelman Trust Barometer survey of institutional investors. Three in four U.S. individual investors said they are not familiar with the concept of sustainable investing, having heard little or nothing about it, according to a Wells Fargo/Gallup Investor and Retirement Optimism Index survey released in April.
The explosive growth of green finance makes sense. Increased investor interest in climate risk and, more recently, biodiversity risk is fueling the growth of several funds, as is an increased societal focus on economic, gender and racial equity. All of these issues are heading inexorably toward tipping points. Investors are increasingly moving money accordingly.
Still, the markets for sustainable investing and finance are young and the standards are evolving or, in some cases, don’t yet fully exist. It’s still the Wild West out there.
There are glimmers of hope. Just last week, for example, the Sustainability Accounting Standards Board (SASB) and the International Integrated Reporting Council announced their intention to merge into a unified organization, the Value Reporting Foundation, "providing investors and corporates with a comprehensive corporate reporting framework across the full range of enterprise value drivers and standards to drive global sustainability performance," according to the press release. Earlier this year, SASB and the Global Reporting Initiative (GRI) announced their intention to collaborate. Such consolidation and collaboration are sorely needed to truly catalyze the full potential of sustainable finance.
Ultimately, all of this relies on lots of data — ESG data — being compiled by a relatively small number of firms whose ratings can wield outsized clout among investors. The data is used to analyze stocks, of course, but also to assess creditworthiness and possibly even help determine whether a company is a great place to work.
But where is this data coming from? How is it compiled? Who owns it? Is it accurate? Why do different ratings organizations assess the same company differently? These are among the questions still to be addressed.
And these are among the topics we’ll be covering at GreenFin.
We’ll be joined by our convening partner, S&P Global, along with a who’s who of community partners, including BSR, Capitals Coalition, CDP, Ceres, Competent Boards, GRI, Intentional Endowments Network, National Investor Relations Institute, Responsible Asset Owners, SASB, United Nations Global Compact and the World Business Council for Sustainable Development.
We’re also excited to have a growing corps of advisory board members and sponsors, including from Citi, CDP, ERM, HP Inc., Intel, Morgan Stanley, SASB, S&P Global, State Street and Wells Fargo — with more to come. (Let me know if you are interested.)
I hope you’ll join us for this landmark event.