HSBC annual report has revealed positive insights on sustainable financing in the post-pandemic world
Author: Jessica Sam
The effects of the pandemic have brought out the importance of sustainable financing to investors and issuers around the globe. Previously, Environment, Social and Governance (ESG) was the desired approach in finance but it has now become a core element in capital markets. Given this, HSBC has revealed the changing face of sustainable financing in their 2020 annual report.
The pandemic has undisputedly changed the views on sustainability universally. It has created a thriving concept called the ‘Great Reset’ — an opportunity to reflect and reset our world for a better future. Surrounding this, many investors have included ESG in their financing. ESG investors are also known as “socially responsible investors” who incorporate environmental values and concerns instead of just considering profit-risk factors in an investment opportunity. The HSBC 2020 global report surveyed around 2000 market participants around the world and revealed that 90% of issuers and investors regard environmental and social issues as important
In the survey, 30 % of all investors say that the pandemic has strengthened their commitment to considering ESG factors in the long run. While 49% believe that taking environmental and social factors into account in financing is of lower risk, 17% say that ESG investing involves higher risk. In 2019, only 12% of investors believed that.
While most investors and issuers have shown their interest in sustainability, they have reported that there are still some obstacles in their path. One of their main issues is the data and transparency in adopting ESG. Investors have raised concerns that there is a lack in the quality and availability of ESG data and is not comparable enough. Half of the investors want more data on measuring the impact of their investments, environmental risks and guidance to achieve United Nations’s Sustainable Development Goals.
Furthermore, 41% of issuers believe that becoming sustainable is important but economic factors during the pandemic have made it hard for them to seek ESG. However, the increased importance of sustainability is prompting the economy to create and adopt new instruments to choose sustainable solutions. For example, Sustainability-linked loans (SLLs) have gained increased popularity and provide loans to companies that want to raise their ESG performance.
The HSBC report on analysis reveals that the pandemic has admittedly brought sustainable financing to the mainstream and given the world an opportunity for a ‘Great Reset’. The report asserts that sustainability will become the new priority in the post-pandemic world.
Image Credits: Visual Stories || Micheile on Unsplash
Reference: gbm.hsbc.com
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