Global ESG 2017 Outlook Gregory Elders, Shaheen Contractor

Bloomberg Intelligence analysts

Election results in the U.S. and U.K., and 2017 elections in several European countries, may fuel more of an inward focus, tamping down aggressive climate-change goals and other environmental, social and governance (ESG) efforts.

While the strong hand of regulatory support may weaken, it isn’t disappearing, nor will demand and cost trends that impact companies. Investor focus on ESG will intensify, as over half of European assets and 20% in the U.S. consider such factors, and efforts in Japan have increased.

Low carbon wind tempered, momentum carries forward

President-elect Donald Trump’s victory took the wind out of the low-carbon transition sails, but momentum from efforts at the state level, other countries and technology cost trends means efforts will continue, even if clouded.

China’s plans to implement a national emissions trading scheme, alongside new taxes in other countries, will keep the pressure on cutting carbon. Battery and plug-in electric vehicles growing to 1 % of global auto sales so far in 2016 points to longer-term oil demand pressure.

Green bonds may lead hesitant clean-finance growth

Green-bond issuance growth may need to power climate change-related financing higher if renewable energy investments stagnate. Clean-energy investment through 2020 may stagnate shy of 2015’s $349 billion peak, after dropping 15-20% in 2016, according to Bloomberg New Energy Finance.

In contrast, the broader green bond market that finances efforts including low-carbon energy, transport and buildings may build on its record-breaking issuance, powered by continued Chinese efforts.

Gender pay-gap scrutiny drives corporate cleanup

Companies will need to spend 2017 identifying and addressing gender pay-gap issues ahead of U.K. reporting requirements in 2018 and potentially more investor proxy proposals in the U.S.

Women are slowly making headway in company board rooms, holding a median 20% of seats across S&P Global 1200 index members. Companies reporting on and achieving grade and pay parity could do more to help attract and retain diverse talent than focusing on just their director ranks.

Companies beware drawing investor governance wrath

Shareholder voting power is a rarely wielded tool, yet investors may be more willing to exercise their voice in perceived egregious situations. U.S. companies are increasingly relenting on proxy access measures to allow director nominations, and Japanese investors are under government pressure to be more forceful in prodding companies to boost performance.

Many investors may be hesitant to rock the boat, but companies that draw scrutiny for poor governance practices may incite shareholder wrath.

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