2022 in review: ESG at the crossroads

December 23, 2022

With 2022 coming to a close, Minerva takes a brief look at the major trends seen this year and comments on the future of ESG investing.

Whilst responsible or ESG investing has had its ups and downs throughout the decades, 2022 saw new challenges spring up from all sides. You need only look at Minerva's top 10 most popular stories from 2022 to understand the challenging year it has been.

1. EU Lawmakers outline new board diversity regulations
2. UK’s advertising regulator accuses HSBC of greenwashing
3. Amazon shareholders vote against socially focussed resolutions
4. Pooled fund split voting gains further support
5. SEC fines BNY Mellon over false ESG statements
6. Mining giant Rio Tinto loses investor votes in AGM
7. Japan regulator publishes ESG code of conduct
8. EU requires audited sustainability disclosure of international companies
9. Texas, Florida blacklist ESG investing
10. EU to crackdown on greenwashing in green bonds

As market regulators across the world sought to quash the possibility of greenwashing in company reporting, shareholders found a renewed interest in social issues such as human rights. Although these trends place important pressure on the market to improve ESG reporting, all stakeholders face the significant challenge of staying compliant in an increasingly complex space.

Of course, the most high-profile challenge facing ESG this year has been the growing anti-ESG movement, especially in the United States. Whilst several Republican states have launched anti-ESG campaigns, blacklisting asset managers for their pursuit of ESG investing, support for the practice has remained strong at the federal level.

Whilst ESG has faced strong opposition in the US for its perceived lack of fiduciary duty, the rise in greenwashing regulation has led to heavy fines and disillusionment elsewhere. Among many other developments, the EU introduced new greenwashing rules for the green bond market, the UK's advertising regulator accused HSBC of greenwashing, and the SEC fined BNY Mellon for false ESG statements.

With greenwashing becoming more exposed, the debate over whether current ESG practices are to a high enough standard is ever-increasing. Despite the increasing debate over such responsible investing from all sides, it continues to grow at a rapid pace.

Minerva's analysis of AGM results only confirms the increasingly high standard expected of issuers, especially around climate. Climate-related resolutions including say on climate reports saw a significant fall in shareholder support during the UK peak season, with the same being seen in Australia. This is a sign of ESG fatigue, as shareholders are less willing to reward companies for simply publishing a climate or sustainability report, but instead expect to see clear improvement year-on-year.

As fatigue grows around environmental disclosures, social factors are gaining more attention than ever. One high-profile case involved a shareholder proposal made by the Loving Wage Foundation against Sainsbury Ltd, which has been criticised for disproportionate executive remuneration during the cost-of-living crisis that the UK faces.

Looking ahead to 2023, social issues such as human rights disclosure and board diversity are expected to continue to climb up the ladder of priorities at AGMs. The battle for ESG is just beginning, with the debate over greenwashing, fiduciary duty and data availability likely to heat up as we move into the new year.

ESG investing is at an important crossroads. Though its growth appears unstoppable, it must mature if it is to gain legitimacy in the eyes of shareholders, regulators, and doubters.

Check out our upcoming, in-depth review of shareholder voting in 2022, with a look ahead to the 2023 peak AGM season. To find out more, say hello@minerva.info.