Investors are paying attention to corporate ESG
What is ESG?
It’s the acronym for Environmental, Social, and (Corporate) Governance.
- Environment: Environmental factors include mitigation of the climate crisis or use of sustainable resources. Because of great concern for the health of the planet, more investors are looking closely at corporate environmental record and harm to the planet, and how companies are performing as stewards of nature.
- Social: ESG is not only about concern for the environment. ESG accounts for such things as how employees are treated, community impact, and customer responsibility.
- Governance: Corporate governance has to do with aspects of business such as financing, shareholder rights, risk management, tax transparency, reporting, executive pay, and accounting practices.
Investors are awake to how companies manage their environmental and social footprint. In fact, these increasingly influential investors see ESG is as critical to their investment risk and profitability profile as are a company’s financials. These ESG criteria are among the mix of considerations for how a company is valued.
Dun & Bradstreet is watching as well. D&B is an American company providing commercial data, analytics, and insights for businesses. They are paying attention to areas of risk and ESG too – backed up by a lot of data – over 300 million business records worldwide. This data can help businesses avoid disruptions and increase profitability. On the flipside, D&B creates “business credit reports” that could be viewed as similar to a personal credit report, but can be used to evaluate businesses.
Socially Responsible Investing
Socially responsible investors are closely watching for ESG in the corporate world. A quick Internet search on socially responsible investing shows major investment houses are paying attention to this new era – companies such as BlackRock, J.P. Morgan, Charles Schwab, Pimco, and Morgan Stanley, to name just a few. And… the Biden administration is making it easier for people to invest in sustainable funds in their 401(k) too.
Welcome to the new era of sustainable finance. Harvard defines sustainable finance as investment decisions that take into account the environmental, social, and governance ESG factors of an economic activity or project. Fast-moving trends are reshaping financial markets. In this new era, companies that pay attention to sustainable finance trends will have a head start and enable opportunities – if they are ready.
B Corp Certification
Companies are seeing the value of deeper transparency and disclosure. Investors, lenders, customers and others are demanding this greater corporate transparency. Companies that are really paying attention, go for B Corp certification, where they are rated by the highest standards of social and environmental performance, accountability, and transparency.
Banks and insurers look at ESG and risk
Others whose business is judging risk are paying attention too. S&P Global Intelligence recently gave attention to the banking industry paying close attention to ESG. Insurers are factoring climate risk and social issues into their products and portfolios, accelerating a shift that’s been gearing up for years. The Washington State Insurance Commissioner has been a leader nationally among other peers in the area of insurance risk with climate change.
Trends and shifts are changing the way risk is judged
Just take a look at the issues in geopolitics, global health, political elections, and climate change which are transforming how financial markets behave and how important insight is to being responsive.
It’s a dynamic world
Change is a constant, but the rate of change is speeding up. Out there, companies are more and more in the public and regulatory eye. Thus, it’s important for companies to be ready! Assertive action on a range of social and environmental issues is underway.
Peak Sustainability Group works with companies to develop and implement sustainability plans. We help you define how you navigate this new era of corporate citizenship and ESG.
- Environmental impact analysis
- Carbon footprint and emissions inventories
- Strategic sustainability planning
- Sustainability and ESG reporting
- Systems mapping and analysis
- Third party certifications
- Packaging, waste reduction, and recycling