What are Sustainability-Linked Bonds? Sustainability-Linked Bonds (SLB) are a forward-looking performance-based instrument. The bonds financial or structural characteristics (such as the coupon rate) are adjusted depending on the achievement of pre-defined sustainability targets. The adjustment can be in both directions, e.g., an increase in coupon rate if targets are not met or a decrease in coupon rate if targets are met. The key difference with green/social/sustainability bonds is that the proceeds can be used for general corporate purposes.
The Future of Human Capital: Rising on the Agenda
This has been a year of unprecedented uncertainty and upheaval. It has also cemented the materiality of human capital and the importance of examining preparedness for future workplace challenges. Human capital management is a broad ESG issue that captures important and current matters, such as skills development, diversity and inclusion, and employee engagement. It is growing in its importance due to the dynamic and uncertain management landscape. Notwithstanding the shock of the pandemic and the strengthening drive for racial equality, technology, demographics, and globalization are already driving structural change in labour markets.
Building Back Better for the Next Normal
‘Build back better’ has become the new mantra for post-COVID-19 hopes and ambitions. As people, companies and governments are coming to terms with the crisis and starting to consider the post-pandemic world, many are realizing that going back to how things were is neither possible nor desirable. Just like disruptive technologies throughout modern history have swept away what humanity thought was the best or only solution and replaced it with something superior, the disruption brought on by COVID-19 has also opened the door for making and accepting some long-overdue changes. To truly leverage the opportunity to correct the destructive course on many fronts, responses to the pandemic must involve going beyond adapting to the new normal and focus on shaping what we want the next normal to be. Investors can play an important role in this transition by aligning their strategy and active ownership with progressive long-term objectives.
Regulatory Standards and COVID-19: Is Oil and Gas Being Given a Hall Pass on ESG?
Globally, oil and gas companies are weathering a storm like no other in their history. Although volatility seems to have settled somewhat since the early months of 2020 (when the Russia-Saudi Arabia oil price war experienced its most heated moments yet), cost-cutting and debt borrowing continues to plague the industry as the vast majority of COVID-19 related restrictions remain in place worldwide.
How China’s Electric Vehicle (EV) Policies have shaped the EV market
As CO2 emissions are inherent to Internal Combustion Engine Vehicles (ICEVs), Electric Vehicles (EVs) are widely considered to be the logical alternative towards realizing zero emissions. With the continuation of ongoing technological refinement and years’ of heavy investment, EV manufacturers have significantly upgraded the performance of their products and improved economies of scale making EV production more economically feasible allowing for EVs to become a more widely considered consumer choice. Improving economies of scale, in both the EV manufacturing and the recycling of decommissioned batteries along with the grid’s transition towards renewable energy will make the positive impacts of EVs increasingly undeniable.
Tomorrow’s Board: Challenges in a Fast-Changing World
The world is changing faster than it ever has. As a result, companies are increasingly facing numerous and complex challenges with both immediate and long-term impacts. Today, companies are facing a health crisis, a social justice crisis and a fallout economic crisis. The ongoing COVID-19 pandemic and the social justice crisis, calling for the end of systemic racism, have reinforced the need for more diverse boards.
Corporates leverage ESG Peer Performance Insights as a risk management tool
As the social and economic challenges of 2020 continue to unfold and markets remain in flux, the resilience of Environmental, Social, and Governance (ESG) investing marks a silver lining. In the context of today’s bear market, investors are demonstrating their preference for sustainable funds over traditional ones, with Q1 2020 seeing a global influx of USD 45.6bn, compared to outflows of USD 384.7bn for the overall fund universe. Europe has continued to account for the majority of this inflow into sustainable funds, while the U.S. has picked up pace with a 100% y-o-y increase, the highest regionally. Furthermore, Morningstar reported that 89%, or 51 out of 57, of its sustainable indices outperformed their market peers in Q1 2020. For ESG practitioners, this may not come as a surprise as experience has shown that companies with robust corporate cultures and sustainable business practices are best-positioned for long term resilience and growth, leading to stickiness of ESG investments.
Antitrust in the Digital Age
On July 27th, the chief executives of four (Alphabet, Amazon, Apple and Facebook) of the world’s most prominent technology companies will appear before the US Congress as part of an ongoing antitrust investigation into their market power.[i] This is the latest in a series of developments that includes federal and state-level investigations in the US into the market practices of these companies. Back in 2018, as part of Sustainalytics publication, ESG Risks on the Horizon, our team had noted that the antitrust related scrutiny of major technology companies is likely to persist given the market concentration these companies had established within the digital economy. While there is significant uncertainty as to the ultimate regulatory response, given the outsized position of these four companies in the S&P 500 and sustainability indices, this type of regulatory and market scrutiny is an area that is important for investors to examine in terms of long-term risks to the enterprise value of these companies.
The Race to Net Zero: Decarbonization Commitments in the Oil & Gas Industry
Recent reports concerning record decreases in global greenhouse gas (GHG) emissions due to the COVID-19 pandemic have spurred hope for a “green shift” in our global economy, post-pandemic. The importance of this shift cannot be understated, given that capital investments made within the next five-to-ten years will determine the world’s carbon pathway to 2050 and beyond.
Airlines Post-COVID-19: The Challenges to a Climate-Friendly Recovery
Planes grounded, borders closed and passengers staying at home: the past months haven’t been easy for the airline industry. COVID-19 has led to the deepest crisis ever in the history of the sector.[i] Airlines are in dire need of cash to recover, while at the same time the industry is also expected to adapt and prepare itself for the more critical crisis ahead that is climate change. Despite the slowdown of air travel, long term prospects of mitigating carbon footprint of the industry are not clear. Carbon commitments supported by comprehensive programs are in place, nonetheless, our research suggests that existing measures may not be sufficient to curve down emissions and mitigate climate change.
The Shift to Remote Work: Examining the Risk Landscape
This blog post is the first in a two-part series. In our initial article, we will explore cybersecurity and remote work during the COVID-19 pandemic and its role in expanding an enterprise’s attack surface. In our next blog post, we will examine privacy issues related to COVID-19 contact-tracing.
Cruising Post-COVID-19: Lessons and Challenges for the Cruise Ship Industry
In this blog, we assess the impacts of COVID-19 on the cruise ship industry by taking a closer look at the four biggest cruise companies and their COVID-19-related controversies since February 2020. We also gauge their management of product governance and human capital issues, with the aim of informing investors of each company’s preparedness to address relevant risks as well as challenges and potential hurdles in the industry’s post-pandemic operations.
Responsible Cleantech: The Processes Behind the Products
The growth of the cleantech industry seems resilient from an economic perspective. For it to maintain its social license-to-operate, however, it will also need to formulate answers to the environmental and social challenges throughout its value chains.
Beer, Wine & Spirits in the Era of COVID-19
Companies operating in the Beer, Wine and Spirits subindustry have suffered from knock-on effects of COVID-19 lockdown measures, as governments across the globe have moved to close hotels, bars and restaurants, and ban large events and gatherings, such as festivals and sports events. Given that these venues are an important source of revenue for alcohol companies, investors within this space may benefit from a closer look at how firms have adapted to the rapidly changing market conditions.
Coronavirus: Are We Protecting the Most Vulnerable?
As the COVID-19 pandemic swept across the globe at the start of 2020, frontline medical care became a top priority in stopping the virus. Contrary to the improvement in case management at hospitals, the number of cases in long term care homes (LTCH) rose sharply. With the situation evolving by the hour at times, the number of infections and deaths rose exponentially in the US.
Coronavirus: Food Security in a Global Pandemic
As Covid-19 continues to ravage the world, governments have responded with movement restrictions and border closures. While necessary to protect public health, these stricter safety measures are disrupting food supply chains globally, forcing prices upward and increasing the risk of social unrest.
Sustainable Fund Labels: Diverse Definitions of Sustainability
Sustainable financial products are marked with an increasingly large list of tags, from green, sustainable, socially responsible to thematic ESG, water, carbon or impact funds, and not every investor might know how to make sense of these terms. Sustainable fund labels can be one way to signal to the market that the fund has a dedicated responsible investment strategy.
ESGarp Scores: In Search of Reasonably Priced, Low ESG Risk Stocks
The COVID-19 pandemic is likely to further amp up the market’s interest in ESG investment research. It’s not just that ESG funds and indices have generally outperformed their non-ESG counterparts since the COVID-19 sell-off began in mid-February.[i] It’s also that the pandemic itself has drawn attention to ESG issues ranging from biodiversity and habitat loss to employee relations and supply chain management.