These are still early days, however. Soon, we are likely to see sustainable financing morph into a more integrated, intentional approach. Investors will apply ESG integration and best-in-class analysis across all categories of assets in order to enhance their risk and return performance. Active ownership, too, will become an integrated model, with investors routinely engaging with boards and CEOs on companies’ efforts to increase diversity and address their environmental performance, just as they do now on executive compensation, corporate governance, and shareholder rights. Norms and negative screening will be used to inform engagement, not trigger exclusion.
Driving these developments is the increasingly critical role that private sector companies will play in addressing climate change, diversity, and other important societal issues—with large investors pushing them along this positive path. However, translating this investment strategy into tangible financial results for shareholders, both in the short and long term, requires insights into the steps that companies must take to heighten the impact and sustainability of their business models.