Forecasts for 2023: How Will ESG Compliance Shape Investments?

The DRI International Future Vision Committee has published its eighth annual forecast report, which looks ahead to 2022 and its impact on the resilience community. Download the full report for free from the DRI Library and keep reading to learn how corporate citizenship will impact businesses.

Prediction 10: ESG compliance will become a key factor in companies’ future investment decisions.

Compliance with environmental, social, and governance (ESG) standards is a measure of good corporate citizenship based on the premise that companies with poor performance in these areas are more likely to experience materially adverse events. Companies that practice ESG tend to engage in more long-term planning, pay greater attention to their stakeholders, and foster a stronger sense of shared purpose among their employees. This should lead to greater resilience and commitment from all stakeholders.

There are several reasons why ESG will receive greater attention from boards of directors and executives. Growing physical and scientific evidence will play a role, but the main factors are sustainability reporting requirements and pressure from insurers or investment managers. However, ESG is becoming a political football in many parts of the United States. Florida has banned pension funds from considering ESG standards in investment decisions, and 19 other states are considering adopting a similar policy.

Despite these conflicts, most companies view climate resilience and overall sustainability as key issues. This new emphasis presents an opportunity for resilience professionals to take on a truly strategic role. The most forward-thinking companies will likely appoint Chief Resilience Officers, following the model pioneered by the Rockefeller Foundation in the public sector. However, since ESG is a demanding, long-term commitment, it will be interesting to see how important it remains to companies (and shareholders) over the long term.