Business practices focusing on sustainability have become the standard in 2021.
In 2021, the Environmental, Social, and Governance (ESG) movement experienced a significant surge, transforming from a niche interest into an essential framework that is shaping business strategies, investment decisions, and regulatory policies worldwide.
The COP26 meeting in November 2021 emphasised the urgent need for action against climate change and pollution, yet no enforcement mechanism was immediately put in place. Despite this, the private sector has taken the initiative, with companies increasingly focusing on making their global supply chains more sustainable. This shift is characterised by demanding more information, setting higher standards, and encouraging suppliers to prioritise climate and ESG issues.
Tech giants like Google, Amazon, Salesforce, and Microsoft are leading the charge towards renewable energy, aiming for 24/7 operation. Meanwhile, major automakers are turning their attention to electric vehicles, promising to phase out petrol-driven cars within the next 20 years.
This shift towards sustainability is not just driven by altruistic motives. Companies are offering preferential treatment to suppliers who improve their sustainability goals, signalling a clear financial incentive. Moreover, there is increasing pressure from shareholders to reduce environmental impact and to focus more closely on diversity and inclusion in the workforce.
ESG has become a common topic in corporate circles, with managing climate and ESG issues becoming core to business value. Many corporations have made ambitious promises to achieve zero-emission goals and have laid out roadmaps to implement these plans.
The finance sector has also taken a keen interest in ESG-related issues. Banks and investors are questioning their investing decisions and ensuring that ESG is taken seriously. The attack on Capitol Hill in January 2021 resulted in big companies withdrawing their support and donations to political parties and politicians, expanding their role in society.
In 2021, the importance of ESG factors was reflected in rising assets under management devoted to sustainable funds and increased regulatory focus on incorporating ESG risk within financial risk frameworks by central banks and supervisory authorities globally. This marked a shift from voluntary principles towards embedding ESG risks in core risk management and decision-making processes.
Looking forward to 2022, the forecast emphasises continued growth and deeper integration of ESG criteria across industries and markets. Studies anticipate evolving investor behaviour, especially in emerging markets, where ESG investing is influenced by behavioural finance factors such as cognitive biases. The trend also anticipates more sophisticated measurement and disclosure tools to handle ESG risk volatility and spillovers in global equity markets.
Overall, ESG in 2021 and forecast into 2022 reflects a transition from niche interest to an essential framework shaping business strategy, investment decision-making, regulatory policy, and capital allocation globally, driven by both financial performance and broader sustainability imperatives.
[1] Global Sustainable Investment Alliance (GSIA) 2021 Report [2] McKinsey & Company, 2021 [3] World Economic Forum, 2021 [4] United Nations Environment Programme (UNEP), 2021 [5] Cambridge Associates, 2021
- In 2021, the Environmental, Social, and Governance (ESG) movement expanded from a niche interest into an essential factor in finance, lifestyle, and business.
- ESG is not only shaping investment decisions but also influencing home-and-garden choices, as consumers prefer eco-friendly products.
- The tech industry is investing heavily in renewable energy and sustainable living technology, promising to reduce carbon footprints.
- Businesses are migrating away from fossil fuels and towards green energy, following the lead of tech giants like Google, Amazon, Salesforce, and Microsoft.
- In the world of personal-finance, investors are seeking to learn more about ESG and its impact on data-and-cloud-computing, energy efficiency, and sustainable growth.
- Economists predict that ESG will be a significant driver in education-and-self-development, with more courses being offered on sustainable living, renewable energy, and finance.
- The shift towards sustainable living is sparking debates on war-and-conflicts, policy-and-legislation, and crime-and-justice, as resources become more scarce and protection of the environment becomes a priority.
- ESG is pushing companies to prioritize diversity and inclusion, especially in the areas of gender equality, race, and ethnicity.
- Companies are tracking their carbon emissions and energy consumption, and reporting these figures publicly, as part of their commitment to ESG.
- The increasing focus on ESG is leading to more transparency in corporate financing, with companies required to disclose their ESG practices and performance.
- The premier league in football (soccer), the NFL, NCAAs, European leagues, and Serie A, are all considering the impact of ESG on their programs and initiatives.
- ESG is being incorporated into corporate policies and legislation, with governments implementing stricter regulations on energy consumption, emissions, and waste management.
- Companies are conducting regular audits to ensure they are compliant with ESG regulations, and to identify areas for improvement.
- The attention on ESG is influencing general news, with more stories being reported on climate change, renewable energy, and sustainable living.
- The impacts of ESG are also being felt in car-accidents, fires, and other accidents, as companies prioritize safety and environmental protection in their operations.
- Lifelong-learning and continuous learning are becoming essential for individuals seeking to stay informed and involved in ESG issues, as the movement continues to evolve and grow.
