2013 ESG Trends to Watch
December 21, 2012 12:52 PM
If there is one thing that Hurricane Sandy in the US taught us, it is that preparation counts.
What seemed unlikely even just a day before the storm upended business-as-usual and reinforced the primacy of risk management. Identifying vulnerabilities, however, requires challenging core assumptions about what past data and experience can tell us in the face of the unexpected. As MSCI ESG Research looks forward to 2013, we see clouds on the horizon in the context of accelerating climate change and populist disenchantment in key emerging markets with the way business gets done. Yet, those who look beyond the constrained horizons of stagnating home markets and business-as-usual to retool their strategies for new growth drivers have the chance to seize a significant first mover advantage. As growing risk awareness propels investors to seek long-term bets that will sustain them through the next storms and upheavals, these far-sighted companies will gain momentum over the complacent.
1. Waiting For The Storm
What if Hurricane Sandy came every year, to a financial capital near you? Companies on the MSCI World Index have located significant fixed assets in climate-vulnerable areas.
2. Bottom of the Pyramid and Top of the Pack
Sluggish economic growth and regulatory and fiscal constraints will push companies in healthcare, consumer, and other sectors to seek growth in underserved market segments. Yet, the opportunities remain largely unexplored.
3. What Health & Safety Metrics (Don’t) Tell Us
To uncover the next BP, relying on health and safety metrics alone is not enough. Failing to factor in the geographic and industry context obscures the hidden risks that could precipitate the next disaster.
4. Protesting Corruption
Public outrage over corruption has pressed governments in China, India, and Russia to pursue an anti-corruption agenda. Companies most prone to being implicated in corrupt practices have largely failed to shore up their ethics practices.
5. Meaningful Data and the Movement of Markets
There is evidence that signs of improved risk management on ESG issues are being rewarded in the equity market. But while companies have improved their reporting on ESG issues, they often report on issues where they face little financial impact while ignoring issues that pose significant risks to their core businesses.
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