samen
Europe Status Report 2019

Record Climb in CSA Participation as ESG Comes into the Spotlight

13-11-2020 | Insight

This year saw the strongest level of corporate participation in the SAM Corporate Sustainability Assessment (CSA) – up 19% from 2019. We would like to thank all companies that actively participated for their commitment, especially during a period of extreme challenges with the COVID-19 pandemic. This accelerated participation comes at a time when investor interest in ESG funds continues to increase. According to S&P Global Market Intelligence, many large investment funds with environmental, social, and governance (ESG) criteria have outperformed the broader market during the pandemic1.

Speed read

  • All regional participation levels climb
  • Record participation seen in many industries
  • Real estate companies take an active role to help achieve the Paris Agreement
  • Regulations encourage insurance, banks, and diversified financials to be more transparent
  • Participation in the CSA expected to continue climbing in 2021

Each year, over 3,500 of the world’s most valuable2 publicly traded companies are invited to be part of the CSA survey. Of these, the largest 2,500 global companies by market capitalization are eligible for inclusion in the flagship Dow Jones Sustainability™ World Index (DJSI World), and are selected for inclusion if their S&P Global ESG score puts them among the top 10% in their industry. Additional companies are eligible for the growing family of regional and country-specific sustainability indices, such as the DJSI North America, Europe, Asia Pacific, MILA and Emerging Markets. Active corporate participation in the CSA ensures that the S&P Global ESG scores calculated from the CSA paint a complete picture of a company’s ESG performance, invited companies that decide not to participate are assessed based on public information.

All Regional Participation Levels Climb

The record number of companies participating in the 2020 CSA, even under the challenging conditions of a global pandemic, is a true sign that companies see value in increased ESG transparency and an independent evaluation that allows them to benchmark their performance and identify strenghts and weaknesses through their CSA results.
Manjit Jus, Managing Director, Global Head of ESG Research & Data at S&P Global

2020 marked the strongest year ever in CSA’s 20 plus year history, with 1,386 companies from around the world participating, including 238 companies participating for the first time. This represents 40% of all invited firms, up from 34% in 2019, indicating strong corporate commitment as concerns about ESG issues continue to rise, with consumers, investors, and other stakeholders seeking more disclosure. In fact, 84 companies returned this year after taking a break, underscoring the benefits of the CSA benefits of the CSA.

Explore the interactive presentation below for detailed information on participation level by region.

Record Participation Seen in Many Industries

Taking an industry view, the results are also impressive. This year 15 of the 61 industries covered in the CSA had more than a 50% participation rate, a significant change from just one industry in 2019. Furthermore, the number of industries with less than a 30% participation rate dropped to 12 from 18 year-over-year. The two industries that showed the highest absolute increase in participation were real estate (plus 29 companies) and financials (with insurance, banks, and diversified financials together adding 37 first time CSA participants). IT services and software were also notable (together, plus 23 companies).

There are many factors that are driving the interest of companies in specific industries to measure and benchmark their sustainability performance. Some may be concerned with meeting investor interests, uncovering gaps relative to peers, or being more transparent to attract new customers. All factors are leading to an increased level of participation in the CSA to provide ESG insight and support action planning.

Leading real estate companies are expected to go beyond national regulations and incentives when it comes to rates of reconversion in their existing portfolios. This explains the active role being taken by real estate companies in the development of ambitious and innovative sustainability initiatives.
Guillaume Goton, Lead ESG Client Specialist, S&P Global ESG Research

Real Estate Companies Take an Active Role to Help Achieve the Paris Agreement

According to recent studies, the real estate industry is responsible for approximately 40% of all energy used every year and 29% of all greenhouse gas (GHG) emissions. This highlights the substantial responsibility these companies are undertaking in achieving the Paris Agreement goal of limiting global warming to well below 2°C from pre-industrial level. Recent sustainability initiatives specific to the industry are focused on building materials, energy efficiency, and waste management.

The real estate industry has also seen the emergence of a number of global and national regulatory frameworks around the integration of sustainability in business practices. Several key countries (i.e., Germany, France, and the UK) have introduced new legal standards on the ESG performance of existing and new real estate assets, covering both investment and development. More and more, real estate companies are motivated to demonstrate their ability to operate in line with emerging ESG benchmarks.

An increasing number of real estate companies are looking for new ways to address a key challenge for the industry: the refurbishment of existing buildings. Due to the long lifecycle of buildings, new construction will be unlikely to compensate for the surplus of GHG emissions related to the existing building stock.

Tenants in both commercial and residential properties are also asking for more sustainable products and services. This includes net zero energy buildings, sustainable building management and design, renewable energy generation, and leveraging big data to understand where and when energy is being consumed and where improvements can be implemented.

Regulations Encourage Insurance, Banks, and Diversified Financials to be More Transparent

In recent years, the financial sector has seen a large number of regulatory developments on sustainable finance, encouraging financial institutions to be more proactive and transparent in their efforts to support the transition to more sustainable business models. The Task Force on Climate-related Financial Disclosures (TCFD) is facilitating a forward-looking, financially-focused lens on climate reporting. Further, the EU Sustainable Finance Action Plan and the EU Taxonomy Regulation, both ambitious EU-wide initiatives on sustainable activities, will impact how financial market participants disclose sustainable economic activities and investments.

We have seen an influx of additional participants in the CSA from the EU, representing 45% of new participants in this sector. As market developments put pressure on financial institutions to increase disclosure on the impact of their capital allocation activities, we will likely see an increased desire by companies to benchmark themselves against their peers and publicly demonstrate their progress on addressing sustainability issues.
Isabelle Stauffer, Senior Manager, S&P Global ESG Research, Financial Industry Analyst

In 2019, we significantly updated the CSA questionnaire for financial sector industries to better account for these regulatory developments. We are now requesting that these companies disclose their approaches to integrating ESG in each of their business segments, and further disclose quantitative information about their ESG products and services across all business operations (e.g., retail banking, investment banking, asset management, security exchanges, and insurance).

Participation in the CSA Expected to Continue Climbing in 2021

As we look ahead to next year, we expect CSA participation will continue to grow across regions and industries, given the many developments that are impacting corporate ESG action planning and reporting. Assets in sustainable investment products in Europe are forecast to reach €7.6tn over the next five years, outnumbering conventional funds as investors’ growing focus on risks, including climate change and social inequality, push these strategies into the mainstream3. Companies with little information available about their ESG performance will be at a disadvantage, as investment management firms increasingly seek to allocate capital to companies with sound ESG strategies and track records.

Footnotes

1 ESG funds outperform S&P 500 amid COVID-19, helped by tech stock boom, S&P Global Market Intelligence, August 13, 2020

2Measured by free float asset capitalization on December 31, 2019 in the different DJSI regions.

3 ESG funds outperform S&P 500 amid COVID-19, helped by tech stock boom, Financial Times, October 17, 2020