Three ESG issues investors should take into account this year

This year the three environmental, social and governance (ESG) issues that investors should pay attention to are:

1. Regulations related to ESG issues

2. Low-carbon portfolio management

3. Sustainable technology

With regards to the three ESG issues mentioned here, we observe that various countries are increasingly enforcing regulations. They have announced plans to introduce new standards, especially regarding climate change. Regulatory bodies overseeing registered companies in several stock markets, including Thailand, have intensified requirements for sustainability disclosures.

For example, the European Union (EU) has implemented the Corporate Sustainability Reporting Directive since January 1 this year. This directive mandates large organisations and all registered companies (excluding small-sized ones) to disclose information on social and environmental risks and opportunities. If a company falls under these criteria, it must report information according to the European Sustainability Reporting Standards, published in 2025, with data collection starting in 2024.

In the US, the Clean Competition Act, or US-CBAM, a carbon tax regulation, is set to take effect in 2025 for industries emitting greenhouse gases. Additionally, there are draft laws in California, such as SB 253 and SB 261, addressing organisational responsibility for climate data and greenhouse gases, respectively.

Although these laws have become enforceable in 2025, companies are required to start collecting data in 2024, with potential changes based on the US election outcome at the end of the year.

Several other countries are preparing similar legislation and reporting standards. Stricter reporting can help investors assess the environmental and social impact of direct or mutual fund investments. Furthermore, low-carbon portfolio optimisation has become a significant trend, not only for institutional investors but also for individual investors. The focus on investing in assets or businesses with lower carbon emissions aligns with the growing importance of environmental considerations in investment policies.

Lastly, sustainable technology has gained global attention, emphasising the ESG dimension, especially in environmental aspects. This aligns with the global goal of transitioning to net zero emissions, relying on technology to expedite greenhouse gas reduction. Technologies expected to gain prominence include clean energy, circular economy practices, efficiency improvements in supply chains, carbon capture, utilisation, and storage, environmentally friendly transportation, and sustainable fuels.

These three issues are crucial for investment, presenting both opportunities and challenges.

Siam Commercial Bank Plc is committed to supporting sustainable investments in 2024. Investors can expect a range of ESG and climate-related products as viable investment options.

(The writer is CFA SCB wealth chief investment officer, executive vice president, Investment Office and Product Function, Wealth Business Group of Siam Commercial Bank Plc)