Accelerated sustainable growth is the way to ride ESG opportunities in 2022, says State Street

Asset managers in 2022 are well aware of how environmental, social and governance (ESG) investments continue to be a prioritasation in portfolios. 

2022, to date, has proved to be a noteworthy year for ESG investments due, in part, to greater international momentum around climate change in the wake of COP26 and the continued impact from COVID-19, which drove ESG to the forefront for many industries.

Investors responded accordingly, demonstrating a growing desire to deploy capital with a sustainable purpose. Against this backdrop, the role of the financial sector catalyzed change and was a conduit for addressing ESG concerns worldwide.

Investors are demanding that companies act in ways that help maximize the probability of attractive returns over an extended time horizon. Increasingly, the next generation of stakeholders expects to see ESG considerations reflected in where they work, how they spend, and in which companies they choose to invest.

As Ronal O’ Hanley, CEO and Chairman of State Street notes in the company’s annual ESG report, “ESG has largely moved from a question of “what” to “how” and “when.” Looking ahead, we believe that accelerating sustainable growth will be tantamount to the promotion and protection of long-term value. That shift in sentiment will be to the benefit of our stakeholders, our industry, our communities, and the planet we all share.”

Leading by example

As an asset servicer, State Street enables asset owners and asset managers to become more effective in their understanding and usage of ESG as an investment and business lever.

As a global corporation with nearly 40,000 employees, the company has an ESG strategy against which they execute a range of operational initiatives to achieve our own ESG goals. These activities range from carefully managing the company’s environmental impact to bolstering inclusion, diversity, and equity across its workforce and suppliers.

Consistent with prior reporting, State Street measures and disclose its ESG activities according to frameworks created by the Sustainability Accounting Standards Board (SASB), the Task Force on Climate-related Financial Disclosures (TCFD), and the Global Reporting Initiative (GRI). They also fulfil obligations as a signatory to the United Nations (UN) Global Compact and support progress toward the UN Sustainable Development Goals.

In 2022, State Street is dedicated more than ever to its ESG responsibilities and says that sustainable growth is vital to overcome the challenges ahead. State Street’s annual ESG report, somberly notes, “A world that is warming beyond what science tells us is a critical tipping point poses a risk to long-term investors.”

The way through this, says O’Hanley, is accelerating sustainable growth, “Accelerating sustainable growth will be tantamount to the promotion and protection of long-term value. It’s for the benefit of our stakeholders, our industry, our communities, and the planet we all share.”

Accelerating sustainable growth

Every two years, State Street conducts a materiality review to identify and address the ESG factors the company faces. These results help inform how they report on performance according to certain ESG metrics. Material ESG issues are those that are most relevant to an organization’s ESG impacts and ultimately its ability to create long-term value. 

The latest assessment revealed the following eight topics as State Street’s key focus: board governance and ESG management, climate change, data privacy, employee experience, ESG integration, inclusion, diversity and equity; operational and cyber resilience; and risk, ethics and compliance.

For each of the eight material ESG issues listed, State Street has a robust procedure and insights in place to better improve ESG integration across the company.  State Street stakeholders believe it is tangible guidelines and procedures for constructing investment portfolios and managing financing needs that will generate long-term value for clients while strengthening the company’s operational resiliency. They hope to lead by example.

As one of the world’s largest asset managers and custodians, State Street has been deeply engaged around ESG issues for some time, engaging on ESG issues that drive long-term value through their asset stewardship practices.

• If you’d like to read State Street’s in-depth annual Environmental, Social, and Governance (ESG) Report, which describes their approach to ESG matters across the company, industry, and their impact on the communities in which we operate worldwide, you can download the report here.

https://www.statestreet.com/content/dam/statestreet/documents/esg/SSC-ESG-2021-Final-Full.pdf