ESG – Environmental, Social and Governance – are a set of standards for company operations and is a measure of an organisation’s awareness of social and environmental factors which are now becoming criteria used by many socially conscious investors (ESG Investing). It can be thought of as a form of corporate social credit score and considers various factors from the Environmental, Social and Governance fields such as:
Waste and pollution
Board compensation, diversity and structure
Health and Safety
Employee relations & diversity
Political affiliations and donations
This is now becoming more important for every organisation and can certainly add creditability and weight to a company’s reputation which can help to give an edge in an increasingly competitive market.
ESG Investing Investors in recent years have shown interest in putting their money where their interests are aligned and as a result, brokerage firms and mutual fund companies have started offering Exchange Traded Funds (ETF’s) and other financial products that follow ESG standards. This is often referred to as sustainable or socially responsible investing and to assess a company based on ESG criteria, investors will look at a broad range of behaviours. Also, a recent survey by PwC Luxembourg revealed that 71.9% of European Institutional Investors are prepared to pay a premium for ESG products.
Benefits Some of the benefits that an organisation will realise from implementing ESG initiatives include:
Improving environmental performance The environment is of course a huge concern at the moment, and by taking steps to reduce its environmental impact by e.g. using renewable energy a company can reduce its operating costs such as heating and lighting while also making a commitment to an increasingly important global issue.
Managing risk ESG risk management encourages organisations to put appropriate controls in place and to ensure accuracy and transparency in their communications. This in turn results in the company being in a better position to respond quickly to threats and prepare for any regulatory changes that may happen.
Improving people relationships One of the most important benefits of taking a positive stance on ESG is often perceived as an organisation ‘giving back’ and this can be hugely motivating for the employees. As well as this, the specific aspects of ESG risk management have a direct impact on the employee’s working conditions such as working hours, health and safety and staff treatment and diversity, all of which improves the working life of the employee. A happier workforce is always a more productive workforce.
Regulatory compliance and transparency As the industry regulations (as well as Stakeholder requirements) surrounding ESG demand that organisations are accountable and more transparent throughout their entire business activity then it can be expected that businesses will have to report on all ESG issues. This should mean that processes are put in place that makes reporting such information to the correct governing bodies as seamless as possible and this, in turn, will help to ensure regulatory compliance and minimise the requirement for legal intervention.
Vassallo Associates can offer consultancy services to help an organisation with its ESG goals, these services are categorised in line with the 3 specific areas of the ESG shown in the 3 columns above.
By utilising our consultancy services, you can bring your company in line with the ESG criteria that is now becoming so important for companies to stand out from the crowd and strengthen their investment potential as well as aligning with the UN’s Sustainable Development Goals. We can help with understanding how to see the improvement by putting in place and monitoring your ESG metrics.
Contact us now to arrange a pro bono (no obligation) consultation to discuss your requirements.
Start Your ESG Journey Today
We operate out of offices based in London and Malta, however, we can also travel nationally and internationally to provide client support. We also often offer remote audits and training for organisations if required. Do not hesitate to contact us today for a no-obligation assessment of how we can help you.