Key Points:
- Investors and industry groups are increasingly viewing ESG from a value creation perspective.
- The Inflation Reduction Act has increased opportunities in energy transition, including carbon capture and storage, and solar and EV supply chains.
- Data and geospatial technology improvements help companies better assess biodiversity risks and opportunities.
- Governance, human capital, and diversity may be among the most overlooked ESG opportunities.
We recently convened a leading group of industry experts, corporate executives, and thought leaders to explore the latest themes, opportunities, and best practices in sustainable finance and ESG. Amid macroeconomic uncertainty, geopolitical instability, and financial market volatility, a transparent ESG strategy is now recognized as key to financial value creation.
ESG leaders are focused on value creation
News events and the current market and economic environment has changed the way that investors and industry groups approach sustainability. Instead of viewing ESG purely from only a risk mitigation perspective, more investors and leaders are also viewing ESG from an opportunity lens.
Recent legislation drives opportunities in energy transition
The Inflation Reduction Act has not only improved business economics but has also paved the way for energy transition opportunities related to hydrogen, carbon capture and storage, and solar and EV supply chains. Although most leaders recognize these opportunities, they are still waiting for guidance on implementation and incentives.
Biodiversity and nature emerge as key themes
Geospatial technology and data improvement is making it easier to better value nature, and measure and assess biodiversity and nature risks and opportunities.
For example, the Task Force on Nature-Related Financial Disclosures (TNFD) has created a globally consistent tool to help companies assess and disclose on nature related dependencies, impacts, risks, and opportunities.
Governance, human capital, and cybersecurity are overlooked opportunities
Attendees agreed that the three most overlooked or unpriced ESG opportunities include governance, human capital, and cybersecurity. Here are the key themes:
Governance. The main themes include board oversight and risk management as well as the association between strong governance and ‘E’ and ‘S’ pillars. Boards also need to focus on the skills needed to explore new risks and opportunities.
Human capital. Talent strategy has become the most dominant theme. Talent recruitment and cultivation is especially needed to help build up electric vehicle production facilities and enable electrification and batter development at scale. Talent strategy is also becoming more important in sustainable leadership including broadening recruitment, assessing future skills, purpose and culture, flexible work models, and diversity, equity, and inclusion.
Cybersecurity. Investors are urged to engage companies to assess risk mitigation, business continuity preparation and planning efforts (i.e., the type and frequency of disaster recovery plan drills) and the level of contact and communication between cybersecurity teams and executive leadership.
Our Commitment to ESG
RBC Capital Markets’ ESG StratifyTM encompasses all our ESG thought leadership and insights, including our monthly ESG Scoop series and industry-specific publications from our research analysts. RBC’s Equity Research Group delivers thorough, comprehensive assessments of companies spanning all major sectors, along with macro insights and stock-specific ideas to help guide portfolio management decisions.
Sara Mahaffy authored “RBC Capital Markets Global ESG Conference Key Takeaways,” published on April 3, 2023. For more information about the full report, please contact your RBC representative.
