Published on September 13th, 2017 | by Joshua S Hill0
Investors Increasingly Looking To Climate-Related Investments But Want Greater Transparency
September 13th, 2017 by Joshua S Hill
A growing number of investors are looking to increase their climate-related investments, but are at the same time frustrated with a lack of transparency and climate-related disclosure from companies.
These are the key findings from a new report published this week by multinational banking behemoth HSBC and prepared by industry research firm East & Partners, which surveyed a thousand global companies and institutional investors regarding key themes of environmental impact, sustainable financing strategies, and disclosure.
The survey targeted 507 corporations and 497 investment houses and found that 68% intend to increase their low-carbon related investments in an effort to accelerate the transition to a clean energy economy. The appetite for such investment is greatest in Europe, with 97% of investors looking to increase climate-related investments, followed by the Americas with 85% and Asia with 68% — only the Middle East region saw a decline, down to 19%.
However, while investors are looking to increase their climate-related investments, they are hampered and frustrated by the lack of transparency and climate-related disclosure from companies. Specifically, 56% of investors describe the current state of climate-related disclosure as “highly inadequate” — a trend which is most pronounced in Europe (76%), followed again by the Americas (66%), Asia (50%), and the Middle East (30%). Investors also believe that there are barriers in place hampering further climate-related investment. The survey found 79% believe there are barriers in place, including lackluster availability of research and analysis, as well as a lack of standardized sector definitions.
“The global transition to a low-carbon, clean energy economy is now firmly underway, yet companies and their investors are clearly travelling at different speeds,” said Daniel Klier, HSBC’s Group Head of Strategy and Global Head of Sustainable Finance. “If we are to direct the world’s capital towards low-carbon investment opportunities then we need to break through the barriers currently inhibiting its flows. This will require improvements in the availability, reliability and comparability of climate-related information. This demand will only get louder as the market gains a better understanding of how to use these metrics effectively.”
Bafflingly, while 53% of companies have a strategy in place to reduce their environmental impact — Europe again leads the way with 84% of companies with an active strategy in place, followed by the Americas well behind with 54%, Asia with 43%, and the Middle East at 28% — only 43% of companies actively disclose what that strategy is.
Disturbingly, the primary reason in the way of companies increasing their climate-related disclosure is any clear competitive advantage for doing so. As it stands, investor pressure remains the greatest driver of increasing transparency at 83%, followed by international regulations at 77%.