Investors aren’t paying enough attention to the very real environmental, social and governance risks lurking in portfolios, according to the global head of ESG research at HSBC Holdings Plc.
It’s a phenomenon that’s starting to dominate news headlines as events such as wildfires, environmental scandals and labor disputes lead to sudden investor losses. Recent examples include AT&T Inc., whose shares sank amid reports that its cables contained toxic lead; United Parcel Service Inc., which issued a profit warning after trying to resolve a worker dispute; and TUI AG, which has seen its shares tank as many of its tourist destinations get ravaged by fires.
It’s a view that’s gaining traction, even among financial professionals who profess to hate the label “ESG.” A recent Bloomberg survey found that roughly two-thirds of respondents don’t like saying “ESG,” given the political backlash spearheaded by Republicans in the US, but acknowledge they can’t afford to ignore it.
The US Securities and Exchange Commission is seeking to enforce rules that will require companies to show investors just how big their carbon footprints are. And it follows multiple waves of EU regulations requiring ESG disclosures from corporations and investment firms, as well as global efforts to set ESG reporting standards.
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