As investors increasingly factor environmental, social, and governance (ESG) considerations into their decision-making, companies are under pressure to improve their ESG performance.
Despite Brexit uncertainty, UK businesses are at the forefront of corporate sustainability reporting. The UK is home to the world’s first mandatory disclosure regime for quoted companies, requiring them to report greenhouse gas emissions.
As we move into 2023, we expect to see continued progress in reporting as companies strive to meet the increasing demands of their stakeholders. So, what's driving the growth? Here are some of the top ESG reporting trends to watch out for.
Uk asset managers are increasingly incorporating ESG factors into their investment products and strategies
This is in response to both regulatory pressure and investor demand. Investors are increasingly interested in sustainable investing and are pressuring asset managers to offer products that align with their ESG values while focusing on millennials, who are now the largest generation in the workforce.
Regulatory bodies have also begun to act, introducing rules requiring firms to disclose how they consider ESG factors when making investment decisions. These findings suggest that the UK’s asset management industry is undergoing a genuine shift in culture and practice, with ESG becoming an integral part of investment decision-making.
UK Government taking steps to promote ESG initiatives
The UK government is promoting ESG initiatives by making them a priority in its upcoming budget. This includes ring-fencing money for climate-related expenditures and making it easier for businesses to access support for green projects.
In its recent response to reforming the green tax regime, the government aims to encourage businesses to invest in greener technologies and practices by providing tax breaks. This includes introducing new tax incentives and using pension funds to finance green infrastructure projects hoping that these measures will help to accelerate the transition to a low-carbon economy.
The financial sector will continue to recognize the importance of ESG investing
The last decade has seen a fundamental shift in the way the financial sector approaches investments. In the past, financial institutions focused primarily on generating short-term profits for their clients. However, in recent years, there has been a growing recognition of the need to take a long-term view and incorporate ESG considerations into investment decision-making.
This trend is being driven by several factors, including the increasing awareness of the risks posed by climate change, the growing number of millennials who are interested in sustainable investing, and the increasing pressure from regulators to take ESG factors into account.
A mounting body of evidence suggests that companies with strong ESG ratings outperform those with weaker ratings, making ESG investing a sound financial decision as well as a morally responsible one. Whether driven by financial incentives or a desire to do good, the shift toward ESG investing is gathering momentum and is likely to continue to gain ground in the years to come.
The rise of digital reporting
Digital reporting is one of the most important ESG trends to watch in the UK. With the advent of new technologies, companies are increasingly able to collect and report data on their environmental, social, and governance performance. This data can then be used by investors to make more informed decisions about where to allocate their capital. It's the easiest and most convenient way for companies to share their ESG data with investors, and a trend that will only continue to grow as more companies adopt digital reporting practices.
Qubix is at the forefront of this trend, providing digital reporting tools that help companies to track, measure, and report on their ESG performance. We are constantly innovating our ESG platform to stay ahead of the curve to connect the dots for our clients.
The proliferation of climate-related risk
Climate-related risk is the risk that businesses will face financial losses due to climate change. As the effects of climate change become more severe, businesses will be increasingly exposed to risks such as extreme weather events, water shortages, and crop failures. To protect themselves from these risks, businesses will need to incorporate climate-related risks into their decision-making processes.
Since this trend will only be likely to accelerate in the coming years, we expect to see more and more businesses taking steps to protect themselves from climate-related risk. One way they can do this is by using climate scenario analysis to simulate different climate change scenarios and their potential impacts on business operations. In this way, businesses can identify risks early and take steps to mitigate them.
Investors are also increasingly taking climate-related risks into account when making investment decisions. They consider this factor to identify companies that are well-positioned to manage the risks and opportunities associated with climate change. We believe this trend will continue as climate change becomes an increasingly pressing issue.
The growth of ESG data quality and analytics
Data quality is another important trend to watch in the UK ESG space. As reporting requirements become more stringent, investors are placing greater emphasis on the quality of data being reported. This means that accurate and reliable data can maintain investor confidence.
Aside from the "going-green" approach that has dominated in recent years, a large focus will be the social impacts of investments, such as labor rights violations and human rights abuse. An accurate portrayal of a company's social performance is crucial to gaining the trust of both investors and consumers.
Here at Qubix, we take serious work in the quality of our data. We have a team of analysts who are experts in collecting and verifying ESG data and who work tirelessly to ensure that our clients have the most accurate and up-to-date information available. This will continue to be a key focus for us as we work to help our clients make better-informed investment decisions.
Working from home becomes the new “Net Zero”
The coronavirus pandemic has changed the way we work, and it is likely that many of these changes will become permanent. Working from home has become the new normal for many people, and this trend is likely to continue even after the pandemic has ended. Not only does it save on office space and travel emissions, but it also offers a host of other benefits, such as increased productivity and improved work-life balance.
What’s more, with the rise of flexible working arrangements, working from home is no longer a privilege reserved for those in senior positions. It also allows employees to achieve a better work-life balance where they can take care of personal commitments without having to sacrifice their careers. As more and more people embrace the option of working from home, it’s becoming clear that this is one of the top ESG trends that are here to stay.
The Impact of ESG Factors on Supply Chains
As the COVID-19 pandemic continues to ravage the world, businesses are being forced to re-evaluate their supply chains. The pandemic has highlighted the importance of having a resilient supply chain that can withstand disruptions aside from the natural disasters that have become more frequent in recent years.
To protect themselves from future disruptions, businesses are looking for suppliers that have strong ESG policies in place. These policies can help to mitigate the risks associated with supply chain disruptions, as well as improve the overall sustainability of the supply chain. Another is by evaluating the environmental impact of different transportation options and choosing the most efficient option. And finally, companies tend to work with suppliers to develop more sustainable products and packaging.
With an increased focus on corporate social responsibility, we expect businesses to prioritize sustainable and reliable supply chains.
The landscape of sustainability reporting is always evolving. Companies are under increasing pressure to disclose their environmental, social, and governance (ESG) performance. In response, many organizations are looking for ways to improve their sustainability reporting.
There are several trends that are currently shaping the field of sustainability reporting, and the Qubix ESG platform is not lagging but is always being updated to reflect the latest thinking in this area so that our clients can be confident they are getting the best possible data and insights. We offer an end-to-end solution that covers everything from data collection and analysis to reporting and communications and customizes solutions to fit the specific needs of our clients.
Contact us today to learn more about how you can keep up with the latest ESG trends and improve your sustainability reporting.