The investment industry has grown significantly, but rarely has a single topic challenged its long-held theories and investing paradigms all at once. Such is the case with ESG.
A Timeline of Significant ESG Catalysts & Enablers
To understand the future of ESG, you need to understand how we got here, both the internal efforts of the investment community and the external forces that are driving change.
Click on any decade to expand the text. Catalysts (influences from outside of the industry) are shown in red, while enablers (influences from within the industry) are shown in blue.
1971
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Pax World launched first sustainable mutual fund (PAXWX) [enabler]
1972
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United Nations Environment Programme (UNEP) established at the UN Conference on the Human Environment in Stockholm [catalyst]
1977
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Global Sullivan Principles created to promote corporate social responsibility (CSR) in apartheid South Africa [catalyst]
1984
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Forum for Sustainable and Responsible Investment (US SIF) founded [enabler]
1987
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Brundtland Report defined and popularized the term “sustainable development” as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs” [catalyst]
1989
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Exxon Valdez oil spill led to formation of Coalition for Environmentally Responsible Economies (Ceres) [catalyst]
1990
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Domini 400 Social Index launched, the first capitalization-weighted index to track sustainable investments (now the MSCI KLD 400 Social Index) [enabler]
1991
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Sweden became first country to enact carbon tax [catalyst]
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UN Conference on Environment and Development convened 172 governments in Rio de Janeiro for discussions on global sustainability [catalyst]
1995
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International Corporate Governance Network (ICGN) established [enabler]
1997
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Global Reporting Initiative (GRI) established to ensure accountability to the Ceres Principles for responsible environmental conduct [enabler]
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Kyoto Protocol adopted as an international treaty to address global warming through emission targets [catalyst]
1998
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Greenhouse Gas Protocol (GHG Protocol) created by World Resources Institute and World Business Council for Sustainable Development [enabler]
1999
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Dow Jones Sustainability Indices (DJSI) launched [enabler]
2000
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Carbon Disclosure Project (CDP) established [enabler]
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Launch of UN Global Compact [catalyst]
2001
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FTSE4Good Index launched 2001 Institutional Investor Group on Climate Change (IIGCC) established [enabler]
2002
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Johannesburg Stock Exchange became first exchange to require companies to report on sustainability [catalyst]
2003
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Japan’s Ministry of Environment published “Environmental Reporting Guidelines” (updated in 2012, 2018) [catalyst]
2005
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Asset Management Group of the UNEP Finance Initiative published “A Legal Framework for the Integration of Environmental, Social and Governance Issues into Institutional Investment,” known as the Freshfields Report, which permitted and encouraged ESG integration [enabler]
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Kyoto Protocol ratifications brought treaty into effect [catalyst]
2006
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UN Principles for Responsible Investment (PRI) launched [catalyst]
2007
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Climate Disclosure Standards Board (CDSB) founded [enabler]
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European Investment Bank issued the first green bond, called a Climate Awareness Bond [enabler]
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MSCI World ESG Leaders Index launched [enabler]
2009
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Global Impact Investing Network (GIIN) launched [enabler]
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Climate Bonds Initiative launched [enabler]
2010
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Stock Exchange of Thailand published “Guidelines for Sustainability Reporting” [enabler]
2011
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Australian Council of Superannuation Investors (ACSI) and Financial Services Council (FSC) published “ESG Reporting Guide for Australian Companies” (updated in 2015) [enabler]
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Sustainability Accounting Standards Board (SASB) formed [enabler]
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India issued National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business [catalyst]
2012
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Stock Exchange of Hong Kong (HKEX) published the “Environmental, Social and Governance Reporting Guide” (updated in 2017, 2019) [enabler]
2014
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Indian law mandated companies spend at least 2% of net profits in CSR activities [catalyst]
2015
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UN Sustainable Development Goals (SDGs) adopted by all UN Member States as universal call to action [catalyst]
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Paris Agreement established at COP21 aiming to limit climate change to <2°C higher than preindustrial levels [catalyst]
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Task Force on Climate-Related Financial Disclosures (TCFD) established [enabler]
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People's Bank of China established Green Finance Task Force for policy research on green finance and ESG investing [enabler]
2016
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Seven ministries in China jointly announced guiding principles for establishing green finance system, which paved the way for development of green finance and ESG products in the market [catalyst]
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China published “Guidelines for Establishing the Green Financial System” [catalyst]
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G–20 meeting in Hangzhou, China, green finance included in agenda for first time [catalyst]
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Singapore Exchange (SGX) published “Sustainability Reporting Guide” [enabler]
2017
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Climate Action 100+ launched [enabler]
2018
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European Commission announced Sustainable Finance Action Plan [catalyst]
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Bombay Stock Exchange (BSE) published “Guidance Document on ESG Disclosures” [enabler]
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Asset Management Association of China (AMAC) released “Green Investment Guidelines” [enabler]
2019
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Business Roundtable Purpose of a Corporation signed by 181 business leaders, shifting from shareholder primacy to a multi-stakeholder commitment [catalyst]
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S&P 500 ESG Index launched [enabler]
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CFA UK launched Certificate in ESG Investing [enabler]
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IFC launched “Operating Principles for Impact Management” [enabler]
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Securities Commission Malaysia launched “Sustainable and Responsible Investment Roadmap for the Malaysian Capital Market” [enabler]
2020
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In his annual letter to CEOs, Blackrock’s Larry Fink said “climate risk will lead to a significant reallocation of capital” [enabler]
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Commodity Futures Trading Commission (CFTC) published “Managing Climate Risk in the U.S. Financial System” report [enabler]
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Monetary Authority of Singapore (MAS) issued “Consultation Paper on Proposed Guidelines on Environmental Risk Management for Banks, Insurers and Asset Managers” [enabler]
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Securities and Exchange Board of India (SEBI) released consultation paper and proposed update of “Business Responsibility and Sustainability Reporting” [enabler]
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CDP, CDSB, GRI, SASB, and the International Integrated Reporting Council (IIRC) signed a “Statement of Intent to Work Together Towards Comprehensive Corporate Reporting” [enabler]
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COVID-19 pandemic and unrest over racial inequality following death of George Floyd increased focus on social responsibility [catalyst]
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EU taxonomy on sustainable finance final report published [catalyst]
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US Department of Labor received 8,747 comments (95% negative) on proposed changes to ERISA ESG rules that would limit ability of fiduciaries to consider ESG factors [catalyst]
2021
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CFA Institute ESG Disclosure Standards for Investment Products expected release [enabler]
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Scheduled launch of IIGCC Net Zero Investment Framework [enabler]
2030
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UN Sustainable Development Goals target date [catalyst]
Interest in ESG Topics Over Time
The topic “environmental, social, and corporate governance” has never been as popular as it is today, according to Google Trends.
Click graph to enlarge.
PRI Signatory Growth
The Principles for Responsible Investment signatory growth chart indicates that investment organizations have increasingly been committing to integrate ESG considerations in their processes, at a 16% 10-year compound annual growth rate through 2019.
In the first half of 2020 alone, the number increased by 28%, and the assets under management (AUM) of these entities grew 20%, to more than US$100 trillion, boosted by demand and strong relative performance. This figure combines the assets of both asset owners and asset managers and incorporates some double counting.
Click graph to enlarge.
PRI Signatory Growth
The Principles for Responsible Investment signatory growth chart indicates that investment organizations have increasingly been committing to integrate ESG considerations in their processes, at a 16% 10-year compound annual growth rate through 2019.
In the first half of 2020 alone, the number increased by 28%, and the assets under management (AUM) of these entities grew 20%, to more than US$100 trillion, boosted by demand and strong relative performance. This figure combines the assets of both asset owners and asset managers and so does incorporate some double counting.
Click graph to enlarge.
