2023 Top ESG themes in North & South America

With Environmental, social, and governance (ESG) investing now an established factor wjocj all actors must include in their Investment strategies, top ESG themes that both institutional and individual investors across North & South America may be considering in 2023 include:

Sustainability Reporting

One of the most important trends in ESG investing is the increased focus on sustainability reporting. In order to make informed investment decisions, investors need access to reliable and transparent information about a company's environmental and social impact. Unfortunately, this information is often difficult to find. As a result, many investors are calling on companies to improve their sustainability reporting practices. We expect that this will continue to be a major issue in 2023 as more investors seek to invest their money in companies that are committed to making a positive impact on the world.

Climate Change

Climate change is one of the most pressing issues facing the world today, and it is also one of the most important considerations for ESG investors. In recent years, we have seen an increased focus on climate change among institutional investors, and this trend is expected to continue in the coming years. In particular, we expect that investors will increasingly seek out companies that are taking active steps to reduce their greenhouse gas emissions and mitigate the effects of climate change. Across Asia, often referred to as an Emerging Market, Government commitments to sustainable finance are expected to help unlock significant capital and improve investment opportunities for asset owners in the region.

Diversity & Inclusion

Another major issue that is expected to be prominent in 2023 is diversity and inclusion. Investors are increasingly interested in investing in companies that reflect the diversity of our society. This includes companies that have diverse boards of directors and senior management teams, as well as companies that are taking active steps to promote diversity and inclusion within their workforce. We expect that this trend will continue to grow in prominence over the next few years as investors seek to put their money into companies that are making a positive impact on society.

Water Scarcity       

Water scarcity is an increasingly pressing issue globally, particularly in regions such as North America and South America where water availability is already constrained. This issue is expected to come into sharp focus in 2023 as climate change causes further disruptions to local water supplies. Investors are already beginning to pay attention to water-related risks, and we expect this trend to accelerate over the next few years as water scarcity becomes an increasingly pressing concern.                                               

Plastic Pollution 

Plastic pollution is another environmental issue which has gained increased prominence post COVID and will see even greater focus in 2023 due to its increasing impact on our planet. The problem is particularly acute in marine environments, where plastic pollution poses a serious threat to wildlife and nano particles are found across the food chain.

As public awareness of this issue grows, expect investors, Fund Owners and Regulators to begin applying pressure on companies to reduce their reliance on single-use plastics leading to a further significant shift away from plastic packaging over the next few years. 

Human Rights Issues 

Another major issue expected to come into focus for Regulators and Consumers in 2023 is human rights. With increasing global interconnectedness, investors are becoming more aware of human rights abuses happening around the world. This has led many investors to apply pressure on companies doing business in countries with poor human rights records. In addition to this trend continuing over the next few years with investors increasingly seek out companies with strong track records on human rights supported by markets actually holding companies accountable for human rights violations, there is momentum being pursuing historical malpractices.

Emerging Market Risks 

One final issue likely to be prominent in 2023 is emerging market risk. Due largely to political instability in key areas like energy, many emerging markets are considered high-risk investments . Given that volatility in what were previously considered relatively ‘safe i.e. established markets’ these emerging markets are now seen as offering potentially greater rewards for those willing to take on the risk. In the perennial search for new opportunities outside of traditional investment markets, Emerging Markets are likely to see increased interest from investors.

Conclusion:

As responsible investing continues to gain popularity, there will be a significant shift in how capital markets operate which will have a lasting impact on the way businesses operate globally, driving demand for investment strategies which are able to adapt and reflect these sentiments.