What drives corporations forward.

In the world of investing, collaborative engagement in Environmental, Social, and Governance (ESG) issues is gradually gaining traction, particularly in the United States where such collaborations are relatively rare. This shift towards collective action is driven by a growing recognition that regulation, while crucial, is not the only driver of change in both social and ecological aspects.

Investors and asset managers are increasingly engaging with companies based on ESG criteria, understanding that sustainability can pay off financially. The Fidelity Analyst Survey on ESG, for instance, has indicated that companies prioritising sustainability tend to perform better.

Analysts agree that investors' influence is most successful in the governance area. However, they also recognise the potential of collective engagement to achieve more than individual efforts. In fact, one-third of Fidelity analysts believe that collaborative engagement can be more effective and beneficial.

This shift towards collaboration is not limited to the USA. In Europe and Japan, only about one in four analysts report that collaborative engagement is common. Yet, the trend is clear: more and more investors are recognising the power of collective action.

Worldwide organisations are playing a significant role in promoting ESG requirements in companies. The United Nations Global Compact, the Organization for Economic Co-operation and Development (OECD), the Net Zero Asset Owner Alliance (NZ AOA), and partnerships like 500 Global and Shell Foundation, which support sustainable startups and clean technology scaling, are among those providing frameworks, guidelines, and support to foster corporate sustainability, responsible governance, and climate goals globally.

The power of multiple demands from shareholders and bondholders cannot be underestimated. When demands come from multiple sources, they have more power and are more targeted than individual criticisms. Initiatives like Climate Action 100+ unite investors' voices to encourage companies with high CO2 emissions to change their ways.

In the environmental sphere, state financial support plays a role. Desired changes often require long-term implementation, making the collective pressure from investors and consumers essential. A European auto analyst believes that while regulation is the most dominant driver, pressure from investors and consumers can also be supportive in the introduction of electric vehicles.

In the social sphere, consumer pressure is significant. A combination of several tools often proves most successful. When investors, consumers, and regulators work together, the impact is amplified, driving positive change in corporate behaviour.

A survey conducted by Fidelity among its global analysts found that about two-thirds think both individual and collaborative approaches have merit. The key, it seems, is finding the right balance between the two.

In the end, the goal is clear: to create a more sustainable and responsible business environment. And it appears that, through collaboration, we are one step closer to achieving this goal.