BUSINESS ASPECTS OF ESG
A sustainability journey
Ganesh Ramaswamy considers the environmental, social and governance agenda and its implication on tax. Ganesh Ramaswamy Associate, Kreston Rangamani
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n the past couple of years, the topic of environmental, social and governance (ESG) aspects of a business has been extensively discussed and covered across the global media. The focus on ESG has been particularly expedited by climate change, broken supply chains and the after effect of the Covid-19 pandemic. Businesses around the world are under severe pressure from shareholders, investors, regulators, suppliers, customers and communities, to start charting out their sustainability and wider ESG journey. Moreover, ESG considerations dominate many shareholder discussions and institutional policies. For businesses, launching a sustainability journey often means they have to make substantial changes to how they operate. This requires a lot of long term planning, as well as changing business systems, processes, procedures and models from a set model which requires a lot of capital. To support the capital
requirements, there are substantial amounts of sustainable/ESG funding available in the financial market. Businesses are in a position to tap ‘Use of proceeds’ instruments like green and sustainability bonds and loans where the funds are used to finance specific projects and initiatives with social or environmental benefits, as well as ‘ESG linked instruments’ which are ESG and sustainability linked loans where repayments terms are pegged to certain environmental or social performance indicators.
Value creation from ESG
Investors, regulators and other stakeholders have started to demand detailed disclosures regarding the social and environmental commitments of businesses in their periodic reports. Stakeholders are interested in the external impact of the actions of businesses, which will have an effect on both customers and suppliers. Employees want to ensure that their companies focus on ISSUE 125 | AIAWORLDWIDE.COM