Bloomberg Intelligence has published its Global ESG 2023 Outlook.

The report predicts that 2023 will see more pressure for stewardship accountability as activism builds, credible disclosure shifts the focus to performance and regulatory scrutiny in Europe prompts stronger products and flows while the US faces rockier roads.

Adeline Diab, BI Director of ESG research said, “Greenwashing, energy security and geopolitical concerns raised questions about ESG’s efficacy, leading to a two-year decline in net inflows. However imperfect, we believe ESG comes into a recovery to assess long term risks and changing industry landscapes as markets recognise a key framework in those three letters”.

Highlights of the report include:

ESG ETF sentiment
ESG ETF sentiment in Europe remains positive for 2023, defying a global declining trend of the last two years. Our 2023 global ESG ETF view remains neutral as SFDR Article 9 funds and a MiFID II sustainability amendment can support continued appetite for European ESG ETFs, while global demand will likely stabilise following weaker short term flows and momentum.

ESG regulation
More ESG transparency driven by multiple stakeholders is likely next year across the globe, but inconsistencies may bring short term confusion, believes BI. The EU will impose new rules to bring greater corporate disclosure on climate and ESG, while Asia is catching up. But the US will have rockier road with political opposition from Republicans gaining more power in Congress.

ESG scores
Top ESG scores could signal firms are addressing risks and reinforcing strategic positions, which can aid returns and income growth. US and EMEA have higher ratios of stocks outscoring sector peers in ‘E’ and ‘S’ than APAC, which needs to boost disclosure and ‘G’ metrics. BI expects ESG disclosure to improve globally as frameworks standardise, shifting focus toward ESG performance.

Activism gathering steam
Environmental and social advocates as well as anti-ESG activists will continue to propose shareholder resolutions in 2023 to push their agendas. Yet major asset managers are finding ways to deflect what has become a growing spotlight on their stewardship.