Sustainability holds up a mirror to itself and to us
Wherever you look, sustainability is at the top of the agenda. For governments, for citizens and for businesses. And it doesn’t stop there. Sustainability is also becoming ever more stringent towards itself. And that has consequences, including for investors.
International pressure increases
The eyes of the whole world were focused on one location in November: Glasgow in Scotland. The climate summit culminated in an agreement which was signed by all countries. “In that sense, COP26 was of great symbolic value”, says Carolien Bodewes, expert in sustainable and socially responsible investment at KBC Asset Management.
“It demonstrates that sustainability is supported worldwide. Although there are a few caveats. It doesn’t yet mean that all countries are putting their full weight behind every aspect of the climate. China and India, for example, have not committed to the separate deal announced in Glasgow to phase out coal.”
But for Carolien Bodewes, the general trend around coal is nonetheless clear. “The pressure is great”, she says. “A large number of delegates in Glasgow were even talking about a specific date, namely 2030. Countries which continue to support coal are an absolute minority.”
Climate, social aspects and governance
The emphasis at the climate summit was on the environment, but the trend is also clear when it comes to social aspects and good governance.
Sustainability is rushing like an express train through each of these ESG aspects. It’s about more than climate alone.
According to Carolien Bodewes, failing to combine these three elements now will mean paying a higher financial and social price later. “Countries and companies from different countries and sectors are accordingly taking concrete steps”, she says. “Like sustainability itself, they are becoming more stringent towards themselves.”
Evolving with society
Sustainability has shown itself to be far from a static concept. It evolves along with society and in tandem with advancing insights. Society is devoting more and more attention to gender equality, diversity, inclusion and ethics.
“The extension of parental leave, for example, sends out a powerful signal”, says Carolien Bodewes. “It not only increases the likelihood of an equal distribution of household chores and caring for the children, but for companies in particular it no longer matters whether they recruit a man or a woman. Both can take parental leave, so both can be temporarily inactive at the workplace.”
The ‘Warmest Week’ initiative is also a good example of how society is devoting more attention to well-being and inclusion. The annual awareness-raising and fundraising campaign by the public broadcaster VRT is this year based around the theme of ‘Being able to be who you are’.
David Moucheron, CEO of KBC Belgium: “For many people, being able to be yourself is by no means something they can take for granted. That’s why we are supporting this theme. It fits in seamlessly with our corporate values and our DNA. KBC is very proud to be a partner for the Warmest Week initiative, which seeks to create a better, more tolerant society.”
Whistleblowers are also sounding the alarm on sustainability
According to Carolien Bodewes, whistleblowers have an important role in making public ESG abuses, and in doing so often set a precedent that allows others to break their silence, too.
“Whistleblowers are people who cannot live with certain practices in their company”, according to the expert in sustainable and socially responsible investment at KBC Asset Management.
“Because those practices harm the public interest, they decide to go public with them. Whistleblowers are an important link, especially on issues related to sound policy and data privacy.”
To offer whistleblowers more protection, more and more guidelines are being formulated which assess companies on their openness and transparency. KBC takes the aspect of whistleblowers into account in its sustainable and socially responsible investment decisions.
“In our analysis, we assess the quality and scope of the mechanisms present in a company for reporting illegal or unethical actions, and we also look at the number of reports received and the actions taken,” adds Carolien Bodewes.
Stricter policies on sustainability
“Where in the past it was enough to look at the remuneration of senior management and whether it included enough women, good governance today goes much further”, adds Carolien Bodewes.
She cites the example of numerous diversity and gender equality programmes which are emerging within companies. “In its sustainable and socially responsible analysis, KBC looks first and foremost at the efforts companies make to strengthen diversity in the workplace.
We also evaluate initiatives by a company aimed at ensuring equal pay for men and women. The focus here is on the size of the wage gap between men and women and how it can be reduced. Finally, we also assess how transparent a company is about those pay differentials.”
ESG-screening as the basis for sustainable investors
“It demonstrates that KBC's ESG-screening is focused more than ever on playing a pioneering role within the sector”, concludes Carolien Bodewes. “We are tightening up our sustainable and socially responsible policy, but in a considered way. By keeping our ESG methodology in line with trends in society, we are helping to make the difference.”
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This article is informational only and should not be considered investment advice.