ESG investing in Croatia is still in its early phases. However, there is undoubtedly an increase in ESG investments in Croatia and requirements in corporate and investor strategies. In addition, ESG is broadening its scope of influence to cover all economic and policy sectors now. From energy, finance, and urban planning to tax – these are just a few of the areas that are impacted.
Governance criteria assess qualities of government leadership via indexes on corruption, rule of law, press freedom and political rights. The Governance Index gives equal weight to all four criteria. Croatia scores on Governance index 44.00, Corruption index 43.8, Rule of law index 56.5, while the Press freedom is index 0.0 and Political rights 90.5.
At the EU level, asset management companies will need to start announcing how they integrate ESG factors into investment decisions. In 2019 Croaita’s IPOS has adopted Supervisory Guidelines on the integration of ESG factors into investment and risk management of pension funds.
Bloomberg’s Environmental, Social & Governance (ESG Data) dataset offers ESG metrics, and here is how we can look at companies and how they are currently standing in terms of ESG practices.
As shown in the chart by Bloomberg, InterCapital Research in 2019, HT leads the list with an ESG score of 61.97, followed by Ad Plastik with 45.76. We noticed that many companies from Croatia are already publishing many ESG and sustainability reports. This is considered important not only from an environmental and social standpoint but also for companies to embrace a sustainability culture and position themselves in the market as leaders in sustainability. That said, ESG Investments in Croatia are becoming important part of any investors strategy.
Why does the financial sector play a key role in sustainability?
EU Commission has recognised the financial sector as the key player in implementing ESG in Europe. As the president of HUP, Ivana Hazic states; Investing in ESG is the fastest growing asset class in the world and opens thousands of new funds each year that invest exclusively in sustainable companies. Investors became the initiators of change, followed by governments and large financial institutions. There is notably a high level of investments in ESG companies. Multiple types of research show that companies adopting ESG standards have better returns and less risk in the long run.
In Croatia, we have over thirty companies listing their nonfinancial reports on HR PSOR.
Our approach at VX Associates is to help you adapt to existing and future regulatory changes at EU-level. That enables us to anticipate and understand the issues in the rapidly evolving ESG landscape, allowing us to develop innovative solutions for and with our clients.