Global public investors moved faster and further in integrating ESG criteria in their decisions and investments this year.
IN A SINGLE day on 26 May this year, the world witnessed how societies’ values can affect financial value. Three of the biggest publicly traded oil and gas companies suffered a climate backlash. A Dutch court ruled in favour of climate campaigners, ordering Royal Dutch Shell to lower its emissions faster than planned by 45% by 2030. On the other side of the Atlantic, ExxonMobil shareholders elected two new climate-conscious board members proposed by small activist hedge fund Engine No. 1, defying management opposition. The same day, shareholders at Chevron’s annual meeting supported a proposal to cut Scope 3 emissions, again in opposition to the company’s directors. And a court in Australia concluded that the government has a duty to protect young people from climate change. Policy-makers and investors should not be surprised by such rulings or decisions. Even though they are radical and mark a ‘tipping point’, it is clear that momentum for change has been building. Investors can expect to see more and similar action in the courts and at shareholder meetings. This year’s survey of over 100 global public investment institutions – central banks, sovereign funds and public pension funds – reveals that GPIs are serious about environmental, social and governance factors. Readers may think there is nothing new here – this publication has been documenting the gradual incorporation of ESG thinking in investment decisions for at least five years.