Edel O’Reilly is Head of Investor Relations in Goodbody and is a member of the Chartered Accountants Ireland Sustainability Expert Working Group.
Every day, my Goodbody colleagues and I are seeing the opportunities the fast-evolving ESG agenda is presenting for investors to deploy capital behind sustainability initiatives and how many companies are more than stepping up to this challenge.
Navigating the issues and trends related to sustainability poses a steep and ever-evolving learning curve for us all so Goodbody is really pleased to support the Chartered Accountants Ireland inaugural Sustainability Conference this month which will address the key ESG issues facing accountants and financial professionals.
As Head of Investor Relations in Goodbody, I act as a conduit between our corporate plc client management teams and the global investor community and I have witnessed first hand how ESG has transitioned from being ‘important’ to being a core priority for investors and leaders alike. In the last 2 years, this issue has now moved centre stage for all company strategies, with consequences for existing business models and future plans.
Similarly for investors, there has been a sea change in recent times with investing in sustainability transitioning from a ‘nice to have’ to being viewed as a crucial driver of value creation. This has been reflected in asset management where there has been significant progress on integrating ESG strategies into the asset management process, with an acceleration in engagement levels between companies and their stakeholders.
According to a recent EPFR report, during 2020, Socially Responsible Investment (SRI) and ESG investment recorded inflows of $168.7 billion compared to $63.3 billion in 2019, and the global fixed income market is now worth over $1 trillion from a near standing start in 2016.
Sustainability has been rising up companies’ risk registers for years, with the Paris Agreement signed by governments in 2015 putting climate change at the centre of the global discussion. COP26 and the Race to Net Zero campaign have shone an even brighter light on climate change issues globally. Since the onset of Covid-19, we have seen more scrutiny than ever before on ESG issues.
ESG investors are rewarding companies that can prove they are legitimately committing resources to sustainable goals but those without credible plans risk being penalised. Moreover, the investment market is giving companies time to undertake the necessary changes and investments as long as detailed plans are in place. For a time, there was undoubtedly an emphasis on the ‘E’ or what environmental practices companies engage with but the investment community is increasingly focusing on the ‘S’ and ‘G’ when meeting management teams.
I hope to share some more of those investor perspectives at the conference but simply put, we believe that companies that have strong ESG sustainability goals embedded in their strategies will benefit from greater access to debt and equity capital at competitive costs. The financial system is emerging as a key gateway for ESG policy purposes and increasingly, any corporate seeking a loan or an equity investment will be screened through an ESG lens which will determine access to and the cost of such capital. That financial system role, via banks, asset managers, private equity investors etc will be pivotal in driving forward ESG decisions.
Registration for the conference is open here.
You can find information, guidance and supports to help members understand sustainability and meet the challenges it presents in Chartered Accountants Ireland's Sustainability Centre.
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