V-Square Quantitative Management, a member of the Intentional Endowments Network, has released their ESG Trends to Watch in 2022 report.

The following is an excerpt from the report, and the link to the full report can be found below:

“2021 came and went as fast as 2020. The spotlight was on the accelerating climate crisis and the societal issues amplified by the global health crisis, including racial injustice and health inequity. In addition, to those crises, the world is also facing an unprecedented supply chain disruption that is being felt at all levels.

Environmental, Social, and Governance (ESG) investing gathered even more momentum in 2021, driven by regulation, market demand, and investor mandates. Pressure is also being applied on firms and organizations by their various stakeholders, including employees, clients, suppliers, and communities which they operate within. As a result, companies have been expanding their sustainability efforts from the goal-setting mode and literal policies to actual practices including education at the board and senior leadership levels and willingness to link executive compensation with ESG performance.

We reiterate our firm belief that sustainability adds value to companies’ profitability in the long run. In fact, shareholder primacy must no longer be opposed to stakeholder capitalism. Indeed, shareholder primacy, as defined by the Milton Friedman school of economic thought, is a shareholder-centric form of corporate governance that focuses on maximizing shareholder value, while stakeholder capitalism is a system in which corporations are oriented to serve the interests of all their stakeholders. We believe that within a long-termism framework, stakeholder capitalism serves well shareholder primacy; shareholder primacy needs stakeholder capitalism. Absent of that realization, value created at the expense of the non-investor stakeholders may only be short-lived.”

According to the report, the four trends to watch are: 

1. The Net Zero Transition – Practices over pledges
2. Leadership Diversity – Unlock the value as a corporate performance driver
3. ESG Materiality – Bridge the reporting/investing gap
4. ESG Debt – The opportunity goes beyond the touted $11 trillion

For more details on the analysis of these four trends, read the full report. To learn more about the work V-Square Quantitative Management is doing, see their membership page.

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The Intentional Endowments Network (IEN) is a peer learning network of colleges, universities, and other mission-driven institutional investors working together to achieve their risk and return objectives through investment actions that create a thriving, sustainable economy. IEN has more than 200 network members including endowments, asset managers, investment consultants, nonprofit partners, and individuals.