Advancing ESG is an opportunity to reduce and mitigate material risks and discover avenues for value creation.
Increasingly, investors are looking at ESG factors to assess the risks and value of companies and derivative investments. ESG can provide signals about both internal factors (ex. forward looking management) and external factors (ex. business environment).
“ESG-oriented investing has experienced a meteoric rise. Global sustainable investment now tops $30 trillion— up 68 percent since 2014 and tenfold since 2004.”*
Asset managers representing over $ 86 Trillion USD (and growing) are signatories to the PRI principles. The PRI is the world’s leading proponent of responsible investment.
The PRI works to understand the investment implications of environmental, social and governance (ESG) factors and to support its international network of investor signatories in incorporating these factors into their investment and ownership decisions. *
The benefit to companies with advanced ESG extend beyond attracting and retaining investment.
How exactly does a strong ESG proposition make financial sense?
Faciltate Top-Line Growth
Retain and gain customers from new sustainable products and services.
Increase access to resources through strong community and government relations.
Regulatory and Legal Interventions
Robust ESG strategy aligns with regulatory and legal strategy.
Added benefits can bee seen in the form of government subsidy and support.
Poor ESG strategy can incur legal and regulatory intervention.
Through the lens of ESG monitoring, material risks to business, market, and operations can be identified and mitigated.
Studies indicate an increase in motivation and productivity from a belief in mission and impact.
Attract and retain top talent through an increase in credibility and ESG ranking.
Increase rate of return through strategic investment, asset allocation, and sustainable capital expenditures.
Avoid costly mistakes from stranded assets and write-offs.
Investment and Asset Optimization
Energy & Water Intake
EX) Strong ESG strategies can reduce consumption of energy and water.
EX) Lack of ESG strategies can increase waste, increasing removal and mitgation costs.
Through ESG strategy and frameworks, lower costs through decreased consumption of inputs such as water and energy.
* Gunnar Friede et al., *ESG and financial performance: Aggregate evidence from more than 200 empirical studies." Journal of Sustainable Finance & Investment, October 2015, Volume 5, Number 4, pp. 210-33; Deutche Asset & Wealth Management; McKinsey analysis.