- EOS integrated cost-of-living engagements into its wider stewardship programme, asking companies to provide an assessment of the impacts on their business model and their stakeholders.
- We continued our leading work on biodiversity, advocating for an ambitious Global Biodiversity Framework.
- It is critical for all in the investment industry to remain focused on delivery in line with the long-term interests of underlying beneficiaries.
In 2022, a host of geopolitical and macroeconomic factors combined to threaten the fragile recovery from the pandemic. At the same time, record-breaking summer temperatures in Europe and devastating floods in Pakistan provided a sobering reminder of the human and financial cost of the climate crisis – and the fact that time is running out.
The adoption of the Kunming-Montreal Global Biodiversity Framework by almost 200 countries at the end of 2022 was one of the few bright spots in a turbulent year. Soaring inflation and the resulting cost of living crisis posed considerable challenges for companies, their employees, suppliers and customers, just as the global economy was beginning to emerge from the pandemic.
Acknowledging this, EOS integrated cost-of-living engagements into its wider stewardship programme. We asked companies to provide an assessment of the impacts on their business model and their stakeholders, and the actions they could take to help support the most affected, without damaging their long-term business objectives or fuelling inflation.
With food and fuel prices rising in the wake of Russia’s invasion of Ukraine, there were fears that attempts to tackle the climate crisis would stall. Instead, the soaring price of fossil fuels reinforced the need for a low carbon transition and a faster switch to renewable energy. Encouragingly, we are now seeing some governments and companies recognising that demand reduction through the adoption of energy efficiency measures can play just as important a role as supply substitution.
Throughout 2022, we sought to engage companies on these challenges, without losing focus on the end goal – to limit global heating to a maximum of 1.5°C. We also continued our leading work on biodiversity, advocating for an ambitious Global Biodiversity Framework (GBF) ahead of COP 15. The GBF adopted in December features a target to protect at least 30% of land and seas by 2030 and addresses key issues related to biodiversity loss, such as subsidies and the financing gap.
We carried out our company engagements and public policy advocacy within a polarising landscape for active ownership and responsible investing. While some policymakers and investors pushed for a swifter transition to a low carbon economy, others concerned about changes to economic structures were stridently opposed to ‘ESG’, and climate action in particular.
It is odd that although ESG entered the investment industry’s lexicon way back in 2006 with the launch of the Principles of Responsible Investment (PRI), it feels like it was never more misunderstood than in 2022. We saw how the weaponisation of ESG by both its promoters and detractors for commercial or political purposes reached new levels, and views on ESG became highly polarised. It is critical therefore that all in the investment industry, including EOS on behalf of its clients, remain focused on delivery in line with the long-term interests of the underlying beneficiaries.
Last year we also saw how well-intentioned regulators seeking to protect investors and get a grip on greenwashing added to the turmoil with unclear and burdensome requirements, which are unlikely to help develop a sustainable economy. We would rather see a greater focus on the role that stewardship plays in delivering sustainable outcomes and the enhancement of an investment’s performance.
2023 may bring more of the same. Still, I hope that it will be a year in which investment and stewardship support the creation of wealth for investors – sustainably, and with a laser focus on their interests, undistracted by political aims or virtue signalling.