Towards greater convergence: The ESG landscape on both sides of the Atlantic

Environmental, social and governance (ESG) considerations are a key focal point for governments, investors and companies globally, with a particular emphasis on climate risk. We expect the pace of change on all aspects of ESG, not simply climate change, to continue accelerating in 2021 on both sides of the Atlantic. A new US administration and change in the balance of power in Congress, a proactive, sustainability-focused staff of the U.S. Securities and Exchange Commission, the COP26 climate summit in the UK in November 2021 and growing investor pressure on corporates to address ESG issues, together with new disclosure requirements taking effect across the EU and the UK, all point to 2021 being a critical year.

Despite initial fears at the start of 2020 that the COVID-19 pandemic might relegate ESG issues to a mere ‘nice to have’ as companies and governments worldwide focused on financial survival, the opposite has in fact happened. The combined effect of the global pandemic and the resurgence of the Black Lives Matter movement has acted as an ‘ESG accelerant’ and increased focus on the ‘S’ component of ESG – including issues such as worker health and safety, executive remuneration, the value of dividends, supply chain due diligence, and diversity and inclusion. As a result, we expect the 2021 sustainability agenda, on both sides of the Atlantic, to serve a dual purpose: ‘Build Back Greener’ and ‘Build Back Better’.

This publication, which follows a little less than a year on from our previous publication, Revolution vs Evolution: The landscape and opportunities on both sides of the Atlantic, compares and contrasts climate-related ESG developments on both sides of the Atlantic (in the EU, UK and US), and highlights that greater convergence will create new opportunities for global asset managers, companies and their shareholders as they seek to navigate and influence the omnipresent ESG challenges ahead.