Sustainable Financing and Investing survey – US Report

Buyside to the fore – US institutional investors have embraced the sustainability agenda more emphatically than their company peers – some 67% of asset allocators and owners we surveyed say their focus on sustainability has strongly increased and will continue to increase compared to 21% of issuers who say the same. What’s more, a fifth of investors – and zero companies – say sustainability has become their most important priority.

Investment constraints – While 63% of investors say they see no obstacles to investing in the green and sustainable economy, of the 36% who do see obstacles, most of them say insufficient company disclosure is the one of the main challenges.

Regulatory call – US companies and investors are united in making a strong call for increased regulatory involvement in the green and sustainable economy; 84% of them believe regulators such as the SEC (which is currently considering a new climate risk disclosure rule) should require companies to disclose more information on the environmental effects of their activities. Opinions are split on the social side – 50% of respondents (though more investors than companies) believe there should be greater disclosure on the social effects.

Regulatory call – Most companies (61%) and investors (69%) say they believe investment firms should also be required by regulators such as the SEC to disclose more about how they invest sustainably.

Disclosure impact – More than 50% of companies believe that if regulators required them to increase their disclosure on environmental and social issues it would not only help them become more sustainable, but help their investors understand the sustainability activities better. For investors, about 46% of them say the effect of this would be to help them choose between more and less sustainable companies and make it easier to invest sustainably.

Sustainability-linked debt – Firm interest from US companies in sustainability-linked bonds and loans; 33% say they would consider issuing such bonds, and about 50% say the same for loans. Investors are also very supportive of this type of financing – 90% say these bonds and loans are of interest to them, partly due to them helping to encourage companies to improve their sustainability. In fact, this type of financing presents an opportunity to companies to demonstrate their sustainability strategy and how it is integrated with their financing strategy.

Strategy impact – 61% of companies and investors say the Biden administration’s green economic recovery and transition plan (which includes the drive to cut emissions by 2030 and achieve net zero by 2050) will substantially change how they invest and prioritise opportunities. Less than 25% of them expect no change at all to their investment strategy.

Backing the plan – Although an emphatic 85% of companies and investors believe the administration’s green recovery plan is a good plan, 36% of them – and particularly companies – say they do not believe it is ambitious enough.

Environmental areas of interest – Top five most attractive environmental investment opportunities for companies and investors over the next five years are: Sustainable plastic and alternatives; recycling and circular economy; carbon capture technology; sustainable waste; and sustainable water management.

Social areas of interest – Top three most attractive social investment opportunities for companies over the next five years are socioeconomic advancement and empowerment, access to education and vocational training, and access to financing and financial services. For investors, their top three also includes access to financial services, but they also see greater opportunity than companies around the provision of access to healthcare and food security.