MSCI has published a paper highlighting five ESG trends to watch out for in 2020.
1. Climate change innovators: spotting the sleeping giants
Solving the climate crisis is likely to take innovative technology, scalable deployment
and a bit of luck. Many envision climate saviors coming in the form of plucky
startups. But alternative data is hinting instead at big, established players, biding
their time and quietly assembling an arsenal of climate solutions.
In 2020, investors turbocharge their use of alternative data to spot the companies
plotting to take a lead in propelling us toward a carbon-free economy.
2. New terms for capital: ready or not, here comes ESG
Banks have stepped away from some gun makers, and investors have been keen to
channel money toward green energy projects. But for the average, middle-of-the-road
company, ESG has mostly been tossed to the corporate social responsibility office or
used to prettify annual reports.
In 2020, ESG storms the CFO’s office, elbowing its way onto the bottom line
as financiers get creative with ways to bind ESG criteria to their terms of capital,
introducing a plethora of corporate borrowers into the wide world of ESG.
3. Re-valuing real estate: investing in the eye of the hurricane
Wildfires, storms, floods, droughts, heat waves…. Just as real estate investors and
managers begin to grapple with what climate change might do to their assets
physically, now they may also have to contend with accelerating regulation. Location
matters in real estate, and vast portions of the global property stock are in cities and
regions marching toward zero-carbon building standards.
In 2020, greening the property portfolio will move from a nice-to-have reputation booster to an imperative in the face of a looming “brown discount” if real estate investors don’t kickstart their journey to zero carbon.
4. The new human capital paradox: juggling layoffs and shortages
It’s time to retire old skills and bring new ones in, and fast. The pressure is on for
companies to transform their workforces as competitors go digital, automated and
everything in between. The trick is “How?” Workers aren’t the only ones needing
disparate new skills – HR and management likely do too.
In 2020, many more companies will have to become human capital multi-taskers,
laying off some workers while simultaneously recruiting scarce new kinds of talent
that may seem alien to management. Like a high-wire juggling act, any lapse could
5. Keeping score on stakeholder capitalism: looking for accountability in all the new places
Stakeholders are hot right now. But glossy mission statements have done little to
shift the enduring power dynamic between companies, shareholders and other
stakeholders. Until now, only shareholders have had clear channels for holding
companies to account. Bit by bit, other stakeholders are trying to influence the
In 2020, stakeholders without proxy cards will evolve their activism, joining forces with
willing shareholders and using increasingly sophisticated means to size up whether
companies really “walk the talk” when it comes to their stakeholder commitments.