1. Reporting frameworks will continue to strengthen guidance
Reporting frameworks such as TCFD, GRI, and the CFA Institute strengthened their standards this year. They sought to clarify reporting requirements to ensure ESG disclosures add value to capital allocation and investment decision-making. Cartica recommends that companies have at least a basic understanding of these changes. These reporting frameworks will continue to act as disclosure guides until there is a single global reporting standard.
2. Disclosure requirements will continue to increase
From Hong Kong, India, and Taiwan, to the United States, stock exchanges and regulators have strengthened disclosure requirements around Board diversity, corporate governance, and carbon emissions, with a focus on material issues and anti-greenwashing. Additionally, sustainability organizations have built tools to standardize data. Many companies will have higher expectations in 2022 on the ESG metrics they need to measure, manage, and disclose.
3. Corporate commitments to net-zero targets will grow
Corporate commitments to net-zero carbon emissions have skyrocketed. In the past year, at least 1,500 companies with a combined revenue of more than $11.4 trillion have committed to eventual net-zero regimes, and 136 countries have committed to net-zero to date. Given the urgent need to act on climate, these goals are laudable. However, the Science Based Targets initiative (SBTi) found that only 20 percent of companies in G20 nations and 6 percent of nations outside it have developed goals that counter climate risks. In 2022, Cartica will encourage companies to develop a strategy to address the ways their businesses impact -- and will be impacted by -- climate change.
4. Culture will take center stage
Corporate culture concerns heightened during the COVID-19 pandemic and will continue to be an investor priority in 2022. For example, many investors ramped up their engagement work on how portfolio companies approach their employees' well-being. Cartica encourages companies not to overlook the value of corporate culture as an ongoing process. Proper working conditions, competitive benefits, clear strategy, and an opportunity-seizing mindset can be instrumental in creating long-term value and reputation.
5. Global climate cooperation will continue to be a challenge
Despite understanding the need for global coalitions to tackle climate change, 2021 saw very little climate cooperation among countries. Cartica urges companies not to wait for global climate mandates. Current climate commitments from governments for 2030 would put the world on pace to warm by 2.4 degrees Celsius, not the 1.5 degrees scientists suggest is necessary to avoid extreme climate risks. It is important for companies to lead in the climate change fight in 2022, not to wait for regulation.
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