Issue #74: A weekly update on responsible investment. Forwarded by a friend? Subscribe here.
While there has been a lot of discussion around ESG rising into the mainstream, this week we saw one of the first major push backs on a hot start-up’s IPO due to an ESG issue.
Aviva, M&G and Aberdeen Standard Investments have all announced that they would not be participating in Deliveroo’s forthcoming IPO, one that is expected to be the United Kingdom’s largest in a decade. Why?
Concerns over Deliveroo’s founder enhanced voting power [G]:
- What is he getting? Will Shu, co-founder and chief executive, will hold a stake worth about £500m and retain 57 per cent of the voting rights. That dual-class control will allow him to veto any attempt to oust him from the board by other investors, as well as block a takeover for up to three years after the IPO.
- Why are investors concerned? “It is important to protect minority and end-investors against potential poor management behaviour that could lead to value destruction and avoidable investor loss.” LGIM said.
What other ESG concerns are making investor scared: A heavy reliance on Gig Economy workers [S]
- There is a growing concern around how Deliveroo is treating its 100,000 couriers who deliver orders.
- Why are investors concerned? There is a potential regulatory risk as governments around the world take a closer look at the gig economy model / the long term relationship between Deliveroo and its drivers. Investors also voiced concerns as Deliveroo’s drivers self-employed status denies them the right to a minimum wage, sick pay or holidays.
What does this mean for future tech IPOs? What does it mean for the role of ESG due diligence in venture capital investing… (My guess: A lot more scrutiny a lot sooner!)
ESG reporting — do you need Assurance?
A recent survey by KPMG revealed that of the top 100 companies (by revenue) across 52 countries, 80% have reporting on ESG, and half of those reporting have gone a step further to seek assurance. The UK results show that over 95% of our top 100 sample are reporting on ESG and of those companies, 61% obtained assurance.
Yes, ESG is complicated. Together, we can simplify it.
Our social and economic systems are deeply intertwined, however, one can’t thrive for long when the other is weakened. To this end, both the Sustainability Accounting Standards Board (SASB) and the World Economic Forum (WEF) support efforts to establish a globally accepted system for corporate disclosure that includes key sustainability information and traditional financial information. This system — one including both financial and sustainability information — would provide important new insights into the vital interconnections between business and the world in which it operates.
World Economic Forum.
ESG and growth: a new way of thinking
A dramatic acceleration of interest in ESG in the past 12 to 18 months has increased awareness of the impact of companies on the environment and society. Driven by factors such as climate change, social inequality and the impact of COVID-19 — and amplified through social media platforms — ESG has become front of mind for all. Contrary to popular belief, the older segments of the population are even more concerned than millennials; these concerns are not limited to younger generations. People want businesses to deliver benefits to people while operating sustainably and minimising their environmental and social impact.
Moving into the Mainstream on Outperformance
The pace of ESG adoption in the asset management community more than doubled during 2020, with growth of the ESG fund universe exceeding 100% over the past year and total ESG assets now estimated at $7.2 trillion versus last year’s $3 trillion estimate.
Some other key stats:
- ESG fund universe grew by more than 100% during 2020 with total ESG assets now estimated at $7.2trn versus $3trn in 2019
- U.S. experienced the biggest adoption increase in 2020, but more than 80% of sustainable assets still reside in Europe
- JESG indices outperformed baseline indices by ~40bps in 2020 and assets tracked against the JESG indices now exceed $20bn
*Want to make your ESG processes digital, schedule a call to see a demo of Nossa Data’s software via emailing: email@example.com
The Rise of Women on Boards: By MSCI.
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