The Sustainable Finance criterion was introduced in the Dow Jones Sustainability Index (DJSI) assessment for companies in the Banks, Insurance, and Diversified Financial Services & Capital Markets industries back in 2019 following (then) SAM’s conclusion that this topic is highly material for the finance sector. The importance of this criterion is well-represented in its contribution to the CSA score, with a weight of 9%, which makes the Sustainable Finance criterion the second most important criterion of the CSA for Banks, Insurance, and Diversified Financial Services & Capital Markets industries.

Increasing expectations and a high pace of regulation

S&P Global introduced the webcast by explaining that sustainable finance has been in the spotlight more than ever following the regulatory development and the growing interest from investors in the topic.

The relevance of ESG and sustainable investing to investors has accelerated by recent events such as the COVID-19 crisis, unprecedented wildfires and renewed social movements. This led to breaking records with global inflows into sustainable funds up 88% in Q4 2020 to $ 152.3 billion, and assets in sustainable funds hitting a record high of $ 1,652 billion as of December 2020.

In parallel, regulatory developments in sustainable finance are reaching new levels across the globe. In particular, Europe is spearheading to become ESG-leader with its goal to embed sustainable consideration in the mainstream of financial markets. For instance, EU’s sustainable finance action plan aimed at funding the EU’s ambition in the European green deal will impose important new obligations on many asset managers and financial advisors. The reforms are potentially game changing for any firms looking for access to EU-based investors, or to invest in European companies directly.

S&P Global stressed that as this is becoming a global trend, there is the urgent need for companies to keep up with it.

Increased integration of ESG criteria in operations

The results from the 2020 CSA revealed that there was an increasing integration of ESG criteria in operations across all three applicable industries. Additionally, S&P Global noted that there was an average score increase in integration of ESG criteria in operations across all three industries. The Diversified Financial Services & Capital Markets industry lead the average score increase with 21 points. Insurance companies followed closely with an average of 16 points increase, following by Banks who increased across all segments by 7 points.

S&P Global presented the offering of ESG products/services along with the corresponding public disclosure, for each applicable industry based on the 2020 CSA results, for four product categories:

• ESG Products & Services for Asset Management
• ESG Products & Services for Wealth Management/Private Banking
• ESG Products & Services for Retail Banking
• ESG Products & Services for Stock Exchanges/Private Banking

The result is that although the different (sub-)industries offer a medium to high share of ESG products/services within their product categories (depending on the industries and categories), the average share of companies disclosing the figures of their ESG products/services publicly is low.

Methodology changes to the Sustainable Finance criterion

Every year, S&P Global raises the bar of its assessment and applies methodology changes to continue to be able to identify the world’s ESG leading companies. Following the recent developments and the current performance, S&P Global applied changes to the Sustainable Finance criterion in 2021 by updating the public disclosure requirements for several questions and introducing one new question on ESG products and services for data providers.

Further details on the information provided during the webcast along with best practice examples can be found in the download.

Want to learn more?

With over 15 years of experience in ESG benchmarking support including DJSI, Finch & Beak is one of Europe’s leading experts in improving our clients’ sustainability programs and ESG performance. The Finch & Beak company vision is to accelerate sustainability. Our ESG and sustainability strategy work is characterized by a continuous improvement method that leverages existing assets in the short term while identifying opportunities for strategic development in the future.

If your organization is looking to accelerate its sustainability performance and realize its DJSI-ambitions, please download our our service description or contact Johana Schlotter at johana@finchandbeak.com or call +31 6 28 02 18 80.

^{Photo by Robert Bye on Unsplash}