HSBC has released the its annual Sustainable Financing and Investing Survey, with results indicating an increase in interest in sustainability issues amongst issuers, while the effects of the COVID-19 pandemic have caused investors’ ESG focus to slip somewhat. As in other surveys, the study identified a lack of consistent data as a key obstacle to ESG investing, but found that barriers overall were shrinking.

HSBC surveyed 2,000 market participants for the study, including 1,000 investors and 1,000 issuers. Overall, the survey indicated very strong interest in sustainability by respondents, with nearly 90% regarding environmental and social (E&S) issues as either ‘important’ or ‘very important.’ On a more granular level, however, results appear more mixed. Issuer interest in sustainability improved strongly, with 62% classifying their organisation’s attitude to E&S issues as ‘very important’ (vs 58% last year), only 48% of investors made the same claim, a sharp decline from 64% in the prior year’s survey. The report indicates that investor’s attitudes have shifted as the difficult market conditions caused by the pandemic have caused some to increase focus more fully on near-term investment returns at the expense of E&S considerations. Interestingly, the pandemic has caused the opposite reaction in some investors, with 30% reporting that the crisis has strengthened their commitment to considering ESG factors.

Interest in sustainable finance appears to be growing among both issuers and investors. According to the survey, while only 32% of bond-buying investors currently buy green and sustainable bonds, 36% of those who do not yet invest in these instruments expect to start buying them seriously for the first time. 40% of issuers report having raised debt using green, social and sustainable bonds, and many expressed interest in utilizing innovative sustainable finance products such as sustainability-linked loans and bonds.

While barriers to ESG investing remain, with 46% of investors reporting experiencing obstacles, this figure has declined significantly from last year’s 61%. As in other investor surveys, a lack of consistent, comparable data was found to be the key obstacle to ESG investing, while other reported barriers include a perception by some that ESG investing may offer poor returns, a lack of demand from asset owners, and shortages of qualified staff.

Other key findings from the HSBC survey include:

• Disclosure – only 6% of issuers do not provide disclosure on environmental and social issues, down from 17% last year.
• Risk and return – 59% of investors believe ESG strategies may involve accepting lower returns or higher risk
• Capital allocation – 77% of issuers expect to shift allocation of capital away from activities challenged by environmental and social issues, or towards activities that promote positive environmental or social outcomes over the next five years, compared to 65% last year.