Measuring the ESG maturity of SMEs: Euronext issuers analysis

31/03/2022 - 20:00

Euronext presented the results of its new ESG questionnaire highlighting that issuers are on their way to ESG maturity, but need support in key areas.

In March 2022, Anthony Attia, Global Head of Primary Markets and Post Trade at Euronext, participated in a roundtable focused on ESG and European SMEs, as part of the seminar “Accelerating the ESG transition of SMEs in Europe”. The seminar was organised by the French Economic, Social and Environmental Council (CESE), the Caisse des Dépôts (CDC) Group, Eurofi and the French Presidency of the Council of the European Union.

On this occasion, Anthony Attia presented the results of Euronext’s ESG self-assessment questionnaire. The free online tool was launched in September 2021, with the objective of helping companies, public or private, understand their level of ESG maturity and performance.

The roundtable was moderated by Christophe Bourdillon, Managing Director of CDC Croissance. He was joined by Sylvie Goulard, Deputy Governor of the Banque de France, Aude Contamin, Responsible for European Small and Midcaps at CDC Croissance, and Luc Hendrickx, Member of the European Financial Reporting Advisory Group (EFRAG).

Anthony Attia, Global Head of Primary Markets and Post Trade at Euronext, Aude Contamin, Responsible for European Small and Midcaps at CDC Croissance, Christophe Bourdillon, Managing Director of CDC Croissance, Sylvie Goulard, Deputy Governor of the Banque de France, Luc Hendrickx, Member of the European Financial Reporting Advisory Group (EFRAG), at the CESE on 10 March 2022.

Euronext stands at the crossroads between the thousands of investors that are connected to our platform, and the approximately 2,000 issuers listed on our seven markets. In the context of mounting regulatory obligations, driven by the implementation of the Sustainable Finance Disclosure Regulation (SFDR) and the Corporate Sustainability Reporting Directive (CSRD), ESG is at the centre of many of our daily interactions with investors and issuers active on our markets.

We strive to support our clients, and in particular our SMEs, in their ESG journey with a set of advisory tools designed to help them communicate effectively with their shareholders and navigate the complex European regulatory environment. Via our pre-IPO programmes TechShare and FamilyShare, we also support companies aspiring to go public with dedicated ESG modules, with a strong focus on governance.

Euronext also works closely on ESG with large-cap companies, especially with the launch of ESG versions of its benchmark national indices, all driven by strong investor demand. The CAC 40 ESG and MIB ESG were launched in 2021, and the AEX ESG and the OBX ESG this year.

Issuers are well aware of ESG challenges

114 public and private companies, including large-caps and SMEs from across Europe, took the survey between September 2021 and March 2022. 72% of the respondents are listed companies, of which close to half are SMEs (companies with market capitalisation of less than €1 billion). The results have been crucial in helping us better understand the needs of both listed and private companies, to offer them the best possible support.

Main takeaways are:

Most companies are active on ESG but the majority admit that there is room for improvement in their ESG strategy. Only 11% of respondents consider themselves as “very advanced”

The pressure from stakeholders is increasing: 96% of companies reported being challenged by at least one stakeholder on their sustainability strategy. Enquiries were most frequently from shareholders, investors and banks (60% of respondents), clients (35%) and employees (32%).

All companies encounter the same key challenges: they highlighted a general lack of resources and difficulty in identifying the appropriate ESG criteria to be disclosed. The absence of dedicated tools for the collection of ESG data is also a significant issue.
The lack of ESG tools and internal organisation resources affects SMEs particularly, since the survey found that over 40% of SME respondents do not yet publish completed ESG reporting surveys, and only 39% of respondents have a certified sustainability strategy – although this will become mandatory, for large-cap companies at least, under the upcoming CSRD Directive.

Final ESG scores vary widely depending on the profile of companies: listed Large Caps obtain the best scores, with 30% ranked as “Advanced”, whereas this is the case for only 5% of SMEs. No non-listed companies obtain an “Advanced” score.

Finding support is key

Overall, the level of ESG maturity of European companies is progressing. However, many of them, particularly SMEs, struggle to implement the structural organisation and process changes required to meet new reporting and transparency obligations.

A lack of control, lack of data and difficulties in steering ESG performance can impact both a company’s valuation and its reputation, and can ultimately lead to a risk of divestment.

Today, there is a very strong desire among listed SMEs for further support in their ESG transition. This need will only increase in the coming years with the implementation of the SFRD and the CSRD, as all listed companies will need to be on the same footing in terms of ESG reporting.

With this in mind, all companies, but particularly SMEs, should already be organising themselves and putting in place dedicated ESG resources, whether internal or outsourced. This is where Euronext’s ESG Advisory offering can help, as it is designed to support issuers and companies considering a listing in meeting their ESG obligations.

Euronext is also working on other types of support for issuers in their ESG trajectory, such as helping increase their visibility with investors. As part of our ‘Growth for Impact 2024’ strategic plan, Euronext is designing initiatives to help listed companies develop their ESG strategies to maturity, including the launch of an index dedicated to the climate transition for issuers who have committed to the Science-Based Targets initiative (SBTi).