By CSE research department
Sustainability ESG considerations are increasingly being integrated into the core of corporate strategy and governance frameworks, as well as the lending and investment decisions of financial institutions. The growing interest in sustainability generates increasing influence of ESG issues on strategic and management decisions. Sustainability takes on more weight globally and investors reward companies for improvements to material ESG issues.
While institutional investors are facing geopolitical realignment, businesses and credit markets navigate into a new post-corona virus pandemic normal. There will be investment opportunities in private credit, including restructuring finance and distressed debt. Investors in Canadian companies are more likely to concern themselves with ESG factors. Is Canada ready to walk the talk?
It’s a long way to the top!
According to Sustainalitics‘s Country Risk Ratings, Norway stands at the top of a list of 172 countries ranking the efforts that have been made to manage natural, social and institutional capital to generate long term wealth and prosperity. The Country Risk Ratings measure the risk to a country’s long-term prosperity and economic development by assessing how sustainably it is managing its wealth. Canada lands at place 12 in the ranking.
A country’s ability to utilize and manage these assets in an effective and sustainable manner is determined by ESG performance, trends and events. Driven in particular by a comparably high performance in the Sustainability ESG Ranking, New Zealand comes first, while Canada lands at place 22 on the list.
When investors conduct sovereign bond analyses, analyze country-specific issues affecting investment decisions or carry out macro-economic analyses, it is imperative to have a long-term view on how ESG issues affect a country’s prosperity and economic development and consider the impact and outlook from events happening in a country.
A new mindset of long-term thinking
There are a variety of ESG-related regulations applicable to federally and provincially incorporated companies. In Canada, the regulation of capital markets is a matter of provincial and territorial jurisdiction, and while each province and territory has its own securities laws, regulations and rules administered by a local securities regulator, these local securities regulators who form the Canadian Securities Administrators (the “CSA“) have adopted national instruments and policies that apply in all Canadian jurisdictions.
A number of Canadian public companies have been accused of being slow to disclose ESG factors that are material for their companies’ long term sustainability. On a positive note, in November 2020 the Leading Canadian Pension Fund CEOs issued a joint statement calling on companies and investors to provide “consistent and complete” ESG information in order to “strengthen investment decision-making and better assess and manage their collective ESG risk exposures”. The second one was that the CEOs of eight leading Canadian pension plan investment managers issued a joint statement calling on companies and investors to help drive sustainable and inclusive economic growth.
There is no best practice for ESG integration. Therefore, integrating ESG analysis into the investment process should be done in a manner that best fits each individual firm, its resources, and its stakeholders. However, a set of common best practices is beginning to emerge as professional investors increasingly integrate ESG factors into their analyses and investment processes. The main addition to practitioners’ process is the sourcing and analyzing of ESG information, which is necessary to understand the top ESG issues affecting a company, sector, or country.
In light of these developments, it is time for corporate C-suits and boardrooms to consider if and how they wish to start or redirect, their ESG disclosure in collaboration with investor relations directors and sustainability ESG practitioners.
The Center for Sustainability and Excellence celebrates more than 12 years of trust from global FT 500 corporations and executives to provide Sustainability Education in the US and Canada. CSE is in preparations for two digital Certified Sustainability ESG Practitioner Programs in a row in North America.
The Leadership Edition of the sustainability practitioner program will focus on sustainability and ESG strategy for competitive advantage, Sustainability (ESG) Ratings and Reporting Trends according to North America CSE Research, stakeholder engagement, investors’ relations and the most business-critical opportunities of 2021.
Stay tuned for the promising event in Canada!
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Prepare your corporate response to the challenge of achieving the maximum ESG – Sustainability performance potential, by better aligning with all the latest international non-financial reporting recommendations and standards, including GRI and SASB, and TCFD.
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