The “HSBC ESG Sentiment Survey – Pockets of resistance” provides interesting insights into the evolving landscape of Environmental, Social, and Governance (ESG) investing, based on HSBC’s fourth ESG survey. The survey, conducted from May 31 to June 24, 2023, included 310 professionals from the financial services sector involved in ESG decision-making, representing 292 institutions with approximately USD 8.9 trillion in assets under management.

The key findings of the survey are as follows:

1. Anti-ESG Sentiment in the US: The survey reveals a growing anti-ESG sentiment in the US, which is reflected in the approach to ESG, acceptance of classification systems, and overall trust in sustainability reports. However, this sentiment was not significantly noticeable in other regions.

2. Regulation Evolution: The influence of regulations on ESG trends has slightly decreased since the last survey in February 2023. This is partly attributed to the confusion caused by the Sustainable Finance Disclosure Regulation, which required asset managers to disclose some ESG information about their investments, and the strong pushback against disclosures by many US companies.

3. Understanding of ESG: The understanding of ESG has increased compared to a year ago, but it has declined compared to October 2022. There was a relatively large decline in understanding in Asia compared to Europe, possibly due to the growing awareness of ESG in Asia.

4. International Sustainability Standards Board (ISSB) Standards: When asked about the alignment with the standards set out by the ISSB, over half of the participants from Europe believed they would align, while the sentiment was much lower in North America and even lower in Asia, Latin America, and MENAT.

5. ESG Themes: Decarbonisation remained the top environmental issue, with resilience also gaining more supporters since the last survey. Supply chains have now risen to the top of social issues.

6. Hydrogen and Energy Returns: The survey participants believe that the chemicals and transport industries have the most promising outlook in the emerging hydrogen sector.

7. ESG or Thematic: Some funds, especially in North America, have moved away from associating with ESG and instead label themselves as thematic, reflecting the anti-ESG sentiment.

In conclusion, the survey highlights the regional differences in ESG sentiment and the evolving regulatory landscape. It underscores the importance of understanding and adapting to these changes for investors and companies alike. The rise of anti-ESG sentiment in some regions, particularly the US, is a significant development that warrants further investigation. The survey also points to the need for clearer regulations and standards to guide ESG investments and disclosures.

ESG ratings play a crucial role in this context, providing a standardized measure of a company’s performance in environmental, social, and governance aspects. They help investors make informed decisions and encourage companies to improve their ESG practices. However, the survey’s findings suggest that there is still considerable room for improvement in the understanding and acceptance of ESG ratings, particularly in regions with growing anti-ESG sentiment.

The full survey can be found here.