• Thursday, February 29, 2024
businessday logo

BusinessDay

ESG as an Investing opportunity, Not a Cost

ESG as an Investing opportunity, Not a Cost

ESG (environmental, social and governance) standards and performance measure a company’s social and environmental responsibility. ESG is commonly incorporated into risk reduction, compliance, and investment strategies and encompasses several measurements and best practices. Figure following shows several opportunities to improve ESG performance.

Investment means sacrificing today’s reward for a brighter tomorrow. ESG matches this definition, and CEOs should view it like Research & Development (R&D) or staff training. Sustainability is an investment specific to each organization, based on its basic principles and business style. UPS’s ORION route planning software saves 200 million miles, 10 million gallons of fuel, and 100,000 metric tons of CO2 annually. Companies that implement ESG will have a long-term good influence on society, bottom- and top-line growth, and in some circumstances, a competitive edge.

ESG implementation has five steps; Check each ESG component. Stakeholders: Engage early. Prioritize strategic values. Goal-setting: Success is measured by goals. We aim to raise money for future initiatives by showcasing ESG’s win-win nature.

Uniting Technology with ESG and Sustainability

Without technology, sustainability would not be achieved. Our latest green technology poll found this. 560 enterprises with over $1 billion in revenue rated technology “critical” or “very vital” If sustainable technology is to succeed, CIOs must be involved. They must work together with other executives to identify the technology that will assist the company reach its sustainability goals. Developing and deploying new technology has societal and environmental consequences.

Technology is the answer to fixing some of the world’s largest issues, but it must be utilized responsibly. An effective sustainable technology plan will help a corporation get ahead of its competition and become sustainable. Using tech to drive sustainability, making technology more sustainable and Engaging with your ecosystem to accelerate global development.

 

Source: BRIU

 

Read also: 64% of children in Nigeria not immunised against diseases – NBS report

ESG and Supply Chains: The case for emerging markets

ESG issues are pushing organizations to strengthen supply chain transparency and responsibility. ESG standards are a monthly performance review criterion. Random supplier audits should follow the same standards.

Supply chain management is handled by the chief procurement officer, chief logistics officer, supply chain manager, and/or operations manager. Legal oversight of supply chain management is becoming increasingly critical as regulators focus on ESG’s impact on the corporate value chain.

These disclosures increase investment transparency and include environmental and social impacts and mitigation actions. Sustainability reports details how ESG goals are communicated and tracked like integrated reports of Financial and Environmental & Social (E&S) impacts. Furthermore, this report meets multiple needs.

 

Source: IFC, BRIU

 

How Artificial Intelligence is reshaping ESG ratings

Investment decisions must consider an issuer’s ESG quality to examine long-term risks that could impair its financial stability and the product’s impact on key societal hazards including climate change, fraud and corruption, and social cohesion. This evaluation requires data. Due to regulatory differences, disclosure differs by nation. Unused data sources could improve our ESG assessment with diligent examination. Natural Language Processing (NLP), a subset of AI, may help investors access new data sources. It could provide access to unstructured data signals, expanding our research. Unstructured data provides new information and context for current data. It may also help issuers use and communicate information more efficiently, minimizing “ESG reporting fatigue.”

Traditional vs. AI-powered ESG evaluators

ESG rating organizations that use AI differ from conventional assessors in three ways: who conducts the evaluation, how often it is updated, and what information is used.

 

 

Workforce and ESG

The pandemic will define most CEOs’ careers economically. Due to the task’s enormity, many feared CEOs would downplay ESG issues. CEOs are still interested in ESG, especially the “S.” 63 percent of respondents said they have emphasized the social side of their ESG program in response to the epidemic. 67 percent of company’s report reevaluating their global supply chain due to the future operating model. CEOs are considering how their supply chain might acquire a competitive edge in the new reality. “Being more agile in response to changing customer needs” came out on top, with “government pressure to shift production closer to home” coming in second-to-last.

 

Source; KPMG, BRIU

 

What’s on the horizon?

Leaders must ensure we do not lose pandemic climate gains and develop a green economy. Companies can use their crisis-resilient operational strategies to improve environmental or climatic issues. Companies are altering their product and service ranges to satisfy consumer demand for sustainable brands. ESG performance, notably climate risk, interests investors. Sustainable and socially responsible companies prospered during the epidemic. Effective ESG reporting programs, flexible supply chains, and a personnel strategy focusing on the people and skills needed for an agile and virtual future will be well-positioned.