The new year will bring plenty of surprises when it comes to ESG investing, according to MSCI's "2020 ESG Trends to Watch" report released Monday.
Officials at MSCI ESG Research expect five key trends to emerge in 2020.
One is the possibility that climate change innovation will come not from startups but instead from larger, established players with bigger research and development budgets. As investors increase their use of alternative data to identify those leaders, "that data suggests big players, biding their time, may have a significant impact," the report said.
ESG will also move from specialized offices within companies to the CFO's office, especially when it comes to access to capital. "Even for companies not actively seeking a financing advantage or sustainability halo through these innovative funding mechanisms, their access to capital may be increasingly filtered through an ESG lens in ways they're not prepared for," the report said.
Real estate investors will have to pay more attention to both weather and carbon-emissions regulation. "In 2020, greening the property portfolio moves from a nice-to-have reputation booster to an imperative in the face of a looming 'brown discount' if real estate investors don't kickstart their journey to zero carbon," the report said, adding that near term valuations may be more significantly affected by physical risks, but potential costs are highly sensitive to policy changes.
All companies will have to do more juggling of human capital in 2020, as they recruit new talent and manage or lay off other workers to stay competitive.
2020 will also see rising influence of other stakeholders, including customers, employees and the public, in addition to shareholders who are expected to join forces with them. "With growing awareness that the well-being of their fellow stakeholders can matter to their own long-term results, shareholders are increasingly logical partners and amplifiers of fellow stakeholders' concerns," the MSCI report said.
