IN DETAIL: CORPORATE GOVERNANCE
ESG is Here to Stay Environmental, Social and Governance (ESG) has been brought into sharper focus by recent global events such as climate change and the COVID-19 pandemic. Here’s how businesses can create sustainable models that have ESG principles at their core. – By David Powell
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SG is fast becoming the phrase of the moment and a corporate imperative. Most organisations, if they haven’t already, are busy building Environmental, Social and Governance principles into their business and operating models and communicating these to internal and external stakeholders. Evolution Partners has identified the following critical factors within the overall ESG framework from our work supporting clients to develop their ESG Roadmaps:
At the micro-level, organisations are being driven towards more responsible business models by internal (e.g. employees) and external pressures (e.g. customers; shareholders; and institutional investors, such as Blackrock, Vanguard and State Street). As a consequence, individual firms are adapting to meet demands for transparency regarding their contribution to environmental and social progress, and asset managers are transitioning towards sustainable finance to cater to the preferences of their stakeholders, with ESG filters becoming commonplace in investment portfolios. Recent global events, including climate-related forest fires in Australia and the United States, and the global response to the COVID-19 pandemic, have ESG sharply in focus. As the world looks to deal with these and future challenges, it is clear that the current emphasis on responsible business practices isn’t going away, and sustainable business models need to have ESG principles at their core.
ESG and the corporate world At Evolution Partners, we recognise the transformative impact ESG is having on the corporate world and the benefits available to companies that develop a strategic approach to ESG. These include opportunities to: • Improve business operations and productivity by rectifying inefficiencies; At the macro-level, the United Nations, World Bank and other supranational organisations are looking to drive change by influencing governmental legislative and environmental policy. The European Union’s introduction of a taxonomy to classify environmentally sustainable economic activities, the UK government’s issuing of standards for asset managers within the sustainable investment sector, and the anticipated support of Biden’s administration on ESG investing are just some examples of this global trend.
• Reduce costs and increase profit margins; • Mitigate risk; • Strengthen sustainability; • Improve stakeholder satisfaction; • Develop ties with the communities in which businesses operate; and • Gain and maintain a competitive advantage.
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