Umunna: Fund firms are following orders on ESG

The global pandemic has turbo-charged investors' appetites for ESG, according to the former shadow business secretary.

Fund managers are “following the orders of investors” who are “demanding ESG factors are integrated into corporate business decisions” in light of the pandemic, according to former MP Chuka Umunna.

Covid-19 has “turbo-charged” the focus on environmental, social and governance (ESG), Umunna wrote in the blog entitled ESG factors: Who decides on disclosure?, in his role as executive director and head of ESG at communications firm Edelman.

He referred to figures from the Edelman Trust Barometer Special Report: Brand Trust in 2020, published in June, which found that 90% of respondents wanted brands to protect the wellbeing and safety of their employees and suppliers in the face of the Covid-19 pandemic, even if it comes at a financial cost.

The survey, which garnered the views of more than 22,000 respondents in 11 markets as part of Edelman’s ongoing ‘Trust Barometer’, “underlined the importance attached by the public to the ESG profile of businesses today”, Umunna wrote.

He added that, increasingly, investors do not see ESG integration and financial returns as “an either/or choice, but two sides of the same coin”, citing further research by Edelman among 607 institutional investors in 2019.

This research revealed that 54% of respondents believed ESG initiatives led to a favourable impact on growth, while 47% of the institutional investors surveyed said it boosted the return on investment.

In his article, Umunna also drew on data from Refinitiv’s Sustainable Finance Review which showed that nearly $200bn in sustainable bonds was issued globally in the first half of this year – a year-on-year increase of nearly half – with $130bn of this raised during the second quarter “when the pandemic was at its worst”.

Umunna concluded that “in this post-pandemic world, it is actually the free market that is demanding ESG factors are integrated into corporate business decisions – fund managers are simply following the orders of investors”.