Companies will face rising pressure to improve their environmental, social and governance (ESG) behaviours as investors deploy new tools to influence them, according to NN Investment Partners’ (NN IP) latest Responsible Investing Report.
Until recently, investors have had limited scope to use voting to influence specific ESG policies but according to the report this is set to change as companies will enable investors more to vote on their sustainability policies at annual general meetings (AGMs).
NN IP’s report also identifies four other sustainability trends that will accelerate in 2021 and beyond. One trend predicted is that regulatory action will reshape the industry.
According to NN IP, this trend will mostly focus on Europe for now through the EU’s Sustainable Finance Disclosure Regulation(SFDR) and the EU Taxonomy, but it will also affect companies elsewhere as European investors demand more disclosure from their investments around the world.
NN IP suggests it will become easier for clients to compare products and gain more insight into how their money is used and for what purpose.
UK-domiciled managers and advisors wishing to market into the EU will have to ensure SFDR aligned disclosures and may elect to modify their investment or product governance process.
Further highlights from the report reveal that there will be a growing focus on financing positive impact. NN IP says investors will demand increasing transparency on the impact of investments, so asset managers must improve their reporting and align their data processes to meet clients’ needs.
Adrie Heinsbroek, chief sustainability officer, NN Investment Partners, comments: “Two factors are having the biggest impact on driving change in sustainable investing. The first is the COVID-19 pandemic and the second is the EU’s new framework of sustainable finance regulations, which will change the investment landscape and cause capital to move to different places in 2021 and beyond.”
“By the end of 2020, NN IP had expanded the integration of its stringent ESG criteria into 74 per cent of its assets under management (AuM), versus 68 per cent in 2019. The company aims to integrate ESG criteria into 80 per cent of AuM by 2023. It is a signatory to the Principles for Responsible Investment, from which it received the top score of A+ in 2020,” adds Heinsbroek.
