The ESG Review: Aviva ups the ante - and expect others to follow

Last week BlackRock, this week Aviva.

In turning the screw of expectation on around 1,500 companies that it has an interest in, Aviva Investors - the insurance giant’s asset management division - set out multiple and clear guidelines from its CEO on the ESG-led change that it expects portfolio companies to undergo. And how they should report on “tangible and transparent” goals for 2022.

The announcement was held up by many mainstream media as a signal that large institutional investors would be placing more stringent and more expressed expectations at the doorsteps of their portfolio companies. And it was reported against the backdrop of concerns over ‘box-ticking’ ESG reporting and the voices of some large investment groups over whether sustainable business was overshadowing business fundamentals - with others pointing out that they were one and the same.

The Evening Standard quoted Aviva CEO Mark Versey on “Companies must now turn their pledges into concrete and measurable plans of delivery. Our letter sets out clear expectations as to how they should do this.”

Reuters focused on Aviva’s stipulations on human rights goals, as well as improvements to biodiversity. And GreenBiz covered how the letter also toughened Aviva’s stance on net zero goals.

Meanwhile, sustainability news site Edie ran a piece on a report from McKinsey that $9 trillion was needed annually to deliver an effective net zero transformation globally.

Such bold headlines and big numbers brought further analysis of the value and measurement rigour around ESG, notable a Wall Street Journal article on why ESG investing “can do good or do well, but don’t expect both.” And it came soon after a separate article in the newspaper on “why the sustainable investment craze is flawed.” It was in stark contrast to BlackRock’s Larry Fink, who proclaimed that business success should now be measured by the broader confines of stakeholder, rather than shareholder, capitalism. In other words, sustainable business that is good for the whole world is also good for the business.

In the European Union, the banking watchdog is turning its own screw by toughening ESG reporting rules, as Bloomberg reported.

Given the scrutiny around ESG reporting, growing concerns about box-ticking exercises and questions over alignment between sustainable business and financial success, it was hardly a surprise that Aviva’s big news was placed in the context of ESG disquiet.

But the breadth and depth of what it insists its £262 billion of corporate assets set out to do this year, and how those businesses both apply themselves to the task and demonstrate progress, can surely only be an example that others will look to follow.

The ESG News Review is written by Steve Earl, a Partner at BOLDT

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