Corporate disclosure of environmental data continued to grow in 2016. This is unlikely to relent in 2017, given the added pressure created by the Paris Agreement on climate change. Four in five (81 percent) S&P 500 companies issued sustainability reports, and companies not disclosing are clearly in the minority. Last year also saw a spike in stock exchange disclosure requirements: 38 exchanges around the world require some form of ESG disclosure from companies as a condition for listing.
The Forum for Sustainable and Responsible Investment 2016 annual investor survey tallied a 33 percent increase in one year in assets under management that incorporate environmental, social and governance (ESG) factors, to $7.7 trillion in the United States. That’s a remarkable rise, considering that fiduciary duty and sustainability have been uneasy bedfellows, particularly in the U.S.
. . . Perhaps the biggest trend for 2017 is that ESG factors will be considered in corporate lending and credit risk analysis. ESG factors can affect borrowers’ cash flows and the potential to default on a debt, and therefore are important in considering creditworthiness.