The benefits, pitfalls and importance of ESG World FinanceThe benefits, pitfalls and importance of ESG World FinanceThe benefits, pitfalls and importance of ESG World Finance
Impact Investing Forum 2022
London. April 28-29, 2022.
Strategy Author: Karen Alonardo, Vice President of ESG Solutions, NAVEX Global September 17, 2021 Seaspiracy, the hard-hitting fishing industry documentary, was top of the Netflix most watched list recently. It attracted a lot of attention and received amazing reviews from all over the globe. It also sparked many interesting conversations. Why? It shined a spotlight on sustainable fishing practices that many people were not aware of. Another example in a long list of media exposes and documentaries that focus on environmental, governance and social (ESG) concerns. Consumers are increasingly looking for ethical and sustainable ways to live, shop, and do business. Accenture’s 2020 global survey found that 60% of consumers reported making more ethical, sustainable or environmentally-friendly purchases since the outbreak. Nine out of ten said they were likely to continue doing this. This consumer demand means that businesses must show they are serious about sustainability. ESG has become a topic of discussion in the boardroom. Many realize that failing to ‘prove it’ when it comes ESG policies can have a serious impact on profits and investor relations. NAVEX Global’s recent study found that while 82% of companies have ESG goals and more than half of them are meeting their individual ESG metrics. If businesses want to keep up with ESG demand, there is more to do. It can seem daunting to understand the ESG frameworks, the varying guidelines and the uncertainty surrounding how the S, E and G work together. Understanding the meaning of each of these terms is a good place to start. The ESG acronym refers a trio business measures that are typically used by socially and environmentally conscious investors to identify and vet investments. Each measure adds value. Environmental; measures and addresses how an organisation responds in response to environmental issues such as climate change, greenhouse gas (GHG), emissions, energy efficiency and renewable energy. Social; describes how companies should address complex and changing issues such as data privacy, pay equity and safety, diversity, inclusion, social justice positions, and employee treatment. Governance deals with issues like executive compensation, diversity, independence and management team, proxy acces, whether the chairman or CEO roles are distinct, and transparency in communication to shareholders. The policy elements are brought together
Understanding the ESG policy is key to success. You can identify relevant regulations for your business and implement frameworks that will help you comply with them. Organisations need a framework, or set of standards, to accurately report ESG risks. There are many ESG frameworks companies can use, but there will be many regulations that apply to your business. It is important to choose a framework that suits your business. To help you launch ESG reporting activities, key standards such as the sustainability accounting standards board (SASB), the global reporting initiative (GRI), carbon disclosing project (CDP), and taskforce for climate-related financial disclosures (TCFD), are recommended. These standard bodies have years’ of experience working with industry groups to develop increasingly important metrics. This is essential for investors and other stakeholders, as it allows them to see how a business is performing. If they want to succeed, leadership teams must create ESG programmes and raise awareness about ESG ratings. They also need to report on metrics that are important to these forward-thinking investors. ESG policies: The benefits and the pitfalls
Each ESG framework has a different focus. It can be difficult to choose the right one for your business goals. ESG software can help with this. ESG software such as NAVEX ESG can be used to manage both internal and external ESG initiatives. ESG software can help you set yourself up for sustainable future growth, regardless of whether your goal is to develop a values-based business or make the world a better place. As the right professionals gather more information, ESG goals can be aligned with business goals for greater long-term success. ESG metrics will only increase in importance. Online discussions arose following the Seaspiracy documentary’s fallout. Many viewers pledged to never eat fish again and called for the banning industrial fishing practices. This topic may not directly impact your business, but ESG policies and their increasing importance will. ESG issues are important from a regulatory perspective. This includes responding to current and future global regulations. Businesses must put ESG policies in place now to protect themselves in the future.
The benefits, pitfalls and importance of ESG World Finance