ESG Compliance; All you need to know
Hey everyone! Hope you are well. Decided to do a blog post after the longest time.
Today, let’s talk about ESG. What is it? Environmental, Social, and Governance (ESG) deals with the primary factors that help measure the sustainability and social influence of investments in a company or business. This analysis helps estimate the risks involved and the subsequent performance of a company. Every organisation, is entwined with environmental, social, and governance (ESG) concerns. A strong ESG proposition can add value to every company and it corresponds with larger equity returns. Better performance in ESG also correlates with a reduction in risk.
The growing issue of climate change and scarcity of resources has ensured that investors choose to take sustainability issues into account while making their investment choices. Issues pertaining to sustainability factors can often reflect externalities, such as its impact on the operations and returns of the company that are not entirely affected by the market.
There must be an inclusion of environmental challenges such as climate change while making financial calculations as it could overcome its costs in the future. The recent pandemic has made sure that investor focus more on the governance aspect. How a compliance team detects and mitigates risks to run a smooth functioning business is of more importance to potential investors.
This thought process has thrown light to the significance of companies’ ESG performance, building an understanding among companies and their stakeholders that ESG risks have to be a part of the company’s risk management approach. Due to this, potential stakeholders or investors in this day and age, consider investing only in companies that have a robust ESG performance.
As per reports, in 2020, investments in the ESG funding sector have amplified compared to the same period last year. Streamlining a risk management system provides ESG experts/managers a proper demonstration of their ESG performance through a comprehensive view of risk data. It also helps with investment or asset optimisation by better allocation of capital for the long term, which would be a lot more sustainable or by avoiding any investments that could not be paid off due to environmental issues in the long run. In my upcoming posts let’s talk more about ESG compliance!
Please note that all opinions made on this blog should be treated as a guide and not legal advice.