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Sustainability and Stewardship Outlook

2023 is set to have an increased focus on real-world impact.

Date published
9 Jan 2023
David Sheasby Head of Stewardship, Sustainability and Impact

Over the last decade, stewardship and sustainability have evolved rapidly, driven by a mixture of growing investor demand (asset owners), increased sophistication to manage risk (asset managers), improved reporting (companies) and enhanced regulation (policymakers). As we look into 2023, we expect further evolution in these areas with an increased focus on real-world impact.

Impact investing has become significantly more prominent as investors focus on the intentionality of their investments and seek to generate positive impact alongside financial returns. We expect that investors will look at the role of public equites in generating impact as a key focus for 2023.

Climate will remain a key issue next year with an increased sense of urgency for action as the window for limiting climate change rapidly closes. We see an enhanced focus from regulators (e.g., emissions reporting and, in some cases, mandatory reporting through the Task Force on Climate-Related Financial Disclosures) and investors through the potential expansion of collaborative engagements (e.g., Climate Action 100+). Biodiversity is a related, but separate, issue supported by the emergence of new reporting frameworks, and we expect to see progress in this area over the course of 2023.

Human rights, social issues and inequality will have increased prominence as stewardship topics, and we are also seeing the emergence of regulation in this space. In December 2022, the Principles for Responsible Investment launched a collaborative engagement on human rights and social issues called Advance, which is backed by more than $30 trillion in AUM.

In 2023, asset managers will be asked to demonstrate their authenticity in managing sustainability and stewardship risks on behalf of investors. In the United Kingdom, we will see the emergence of the Sustainability Disclosure Regulation (SDR), which aims to tackle greenwashing and will set a very high bar for products to be called sustainable. In Europe, we expect continued tightening of regulation around how funds are categorized. Finally, in the United States, we should see the next stage of the emerging naming and disclosures regime on environmental, social and governance-labeled products. These developments will be critical for asset managers to effectively deliver the products and the outcomes that investors seek.

Regulatory information and risk warnings

This information is issued and approved by Martin Currie Investment Management Limited (‘MCIM’), authorised and regulated by the Financial Conduct Authority. It does not constitute investment advice. Market and currency movements may cause the capital value of shares, and the income from them, to fall as well as rise and you may get back less than you invested.

The information contained in this document has been compiled with considerable care to ensure its accuracy. However, no representation or warranty, express or implied, is made to its accuracy or completeness. Martin Currie has procured any research or analysis contained in this document for its own use. It is provided to you only incidentally and any opinions expressed are subject to change without notice.

The document does not form the basis of, nor should it be relied upon in connection with, any subsequent contract or agreement. It does not constitute, and may not be used for the purpose of, an offer or invitation to subscribe for or otherwise acquire shares in any of the products mentioned.

Past performance is not a guide to future returns.

The views expressed are opinions of the portfolio managers as of the date of this document and are subject to change based on market and other conditions and may differ from other portfolio managers or of the firm as a whole. These opinions are not intended to be a forecast of future events, research, a guarantee of future results or investment advice.

Please note the information within this report has been produced internally using unaudited data and has not been independently verified. Whilst every effort has been made to ensure its accuracy, no guarantee can be given.

The information provided should not be considered a recommendation to purchase or sell any particular strategy/fund/security. It should not be assumed that any of the security transactions discussed here were or will prove to be profitable.

The analysis of Environmental, Social and Governance (ESG) factors forms an important part of the investment process and helps inform investment decisions. The strategy/ies do not necessarily target particular sustainability outcomes.