Russia’s invasion of Ukraine and anti-ESG sentiment in the U.S. taught institutional investors to expect the unexpected in 2022, but those developments also deepened their resolve to forge ahead with sustainable investing goals — no matter what happens in the upcoming year.

In 2023, institutions’ ESG goals will include more specific expectations placed on companies to address climate risk, labor and human rights issues including diversity, and biodiversity, investors said. Many of them also plan to make a more direct connection between executive compensation and how those ESG expectations are met.

Working toward those goals will bring more robust engagement with the companies they invest in, more collective action by investors, and a push for standardized ESG metrics to track progress in 2023, the investors noted.

It will also put more scrutiny on asset managers, as asset owners grow more discerning, said Chavon Sutton, senior investment director, sustainable and impact investing at Cambridge Associates in New York. With a growing appetite for ESG and sustainable and impact strategies, “our clients are increasingly seeking managers who are intentional about these themes, and who are fully and thoughtfully integrating ESG and (diversity, equity and inclusion) at their firms, and in their investment policies and processes,” Ms. Sutton said.

Asset owners and managers should have backup in 2023 from the International Sustainability Standards Board, which is pushing to issue much-anticipated standards early this year. The standards would integrate sustainability disclosures with core financial statements. The standards will also clarify the connection between how a company incorporates sustainability and how it creates value for shareholders, ISSB said in December.

The standards will also apply to publicly held asset management firms and could give asset owners a clearer picture of their asset managers’ ESG achievements. Although voluntary, ISSB’s global reach should help promote adoption and could spread, at asset owners’ insistence, to private firms, proponents say.

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