The ESG Hype is essential for the future of our planet
The world faces a growing dichotomy in the movement to contain climate change. The growing desire by ESG is an acronym for “environmental, social, and governance”. While the term ESG was coined over 15 years ago, it has recently seen a resurgence of interest, perhaps in particular because of the environmental component of ESG. In essence, ESG is a metric that can be used to identify organisations that are responsible environmental stewards and good corporate citizens who are led by accountable leaders who demonstrate transparency and integrity in their operations. ESG is essential for our planet’s future and humanity’s future. ESG is crucial because it helps us identify the key areas that need improvement to create a sustainable future for our planet. For example, if we want to reduce our carbon footprint, we must focus on improving environmental sustainability. If we want to end poverty, we need to focus on social justice. If we’re going to reduce corruption, we need to improve governance. We must take action now to create a better world for ourselves and future generations.
The progress of ESG in the past few years and what we can expect in 2023
The ESG journey and progress over the past few years have seen an increase in awareness and understanding of the core issues and a corresponding increase in action to address them. Large-scale initiatives like the Paris Climate Agreement and more localised efforts like community garden projects demonstrate the actions taken. While there is still a long way to go, we are making progress, and progress must be recognised.
Looking ahead to 2023, we expect continued advancement on all fronts. Planet health will continue to be a significant focus, with more businesses and individuals taking steps to reduce their environmental impact. Social development will also remain high on the agenda as we work to close the gap between rich and poor. Furthermore, blockchain governance will become increasingly important as we seek new ways to manage our digital world. It is an exciting time for ESG, and we can all look forward to a brighter future.
How investors are beginning to see the value in ESG-friendly companies
Sustainable business practices are no longer simply a “nice to have” for companies – they are becoming necessary. As climate change’s effects become more apparent, investors are increasingly looking for companies that take environmental, social, and governance (ESG) concerns into account. A recent study by MSCI found that sustainable companies outperformed their traditional counterparts by 2.7% per year over the last decade. This trend is only expected to continue as more research is released on the financial benefits of sustainable business practices. With this in mind, it is not surprising that Sustainable Business is one of the fastest-growing areas of investment. In 2018 alone, Sustainable Business investments grew by 32%, reaching $30 trillion. As more and more investors begin to see the value in ESG-friendly companies, we can expect Sustainable Business to become an even more critical part of the global economy.
Ways that you can make your own business more sustainable and environmentally friendly
Vigilance and awareness are critical to making your business more sustainable and environmentally friendly. By paying attention to how you and your employees use resources, you can identify areas where waste is happening and brainstorm ways to prevent it. Future-focused planning is also key to ensuring that your business positively impacts the environment. Rather than continuing to operate in the same way year after year, take the time to research new technologies and best practices that can help your business reduce its footprint. Finally, be adaptive and willing to change course when necessary. The goal is to find a balance between meeting your customers’ needs and protecting our planet for future generations.
Examples of businesses that have successfully implemented ESG policies
While some businesses have needed to adopt environmental, social and governance (ESG) policies faster than others, many companies are beginning to see the benefits of incorporating these principles into their operations. Unilever, for example, has set a goal of becoming carbon positive by 2030 and has already achieved a 20% reduction in emissions since 2010. Alphabet, the parent company of Google, has committed to running its business entirely on renewable energy by 2030. Intel has also set ambitious targets for reducing its carbon footprint and has achieved a 16% reduction in emissions since 2016. Microsoft has embarked on a similar journey, pledging to be carbon negative by 2030.
Similarly, Apple is aiming to be completely carbon neutral by 2030. Salesforce has also made sustainability a core part of its business strategy and has set a goal of being powered entirely by renewable energy by 2025. As these examples illustrate, an increasing number of businesses are realising that adopting ESG policies can lead to operational efficiencies and cost savings, as well as help to build public trust and goodwill.
Defying the Negativities of ESG
While ESG policies have many benefits, they can also have negative associations. In 2022, large institutions and not-for-profit organisations were critical of ESG policies for their impact on financial controls. They argue that businesses neglect their fiduciary duty to shareholders by focusing on environmental and social concerns. As a result, some companies have been hesitant to adopt ESG policies for fear of being criticised by these institutions.
However, a growing body of evidence shows that ESG policies can lead to better financial performance. A study by Morgan Stanley found that companies with strong ESG practices had a lower cost of capital and outperformed their peers in terms of stock price. Furthermore, a report by Bloomberg New Energy Finance showed that renewable energy is now as cheap or cheaper than traditional forms of energy in many parts of the world. While there may be some negative associations with ESG policies, the evidence suggests that they can lead to better financial performance for businesses. We urge companies to continue adopting these policies and see how they can improve their bottom line.
Final thoughts on the importance of ESG for our planet’s future
As we look to the future, humanity’s success will be inextricably linked to the health of our planet. We cannot continue to extract resources at the current rate and expect things to stay the same. We need to transition to a more sustainable way of doing business, which starts with incorporating Environmental, Social, and Governance (ESG) factors into decision-making. Companies are already beginning to see the benefits of taking ESG into account. More resilient businesses are better positioned to weather economic downturns and disruptive events. Moreover, by operating more sustainably, businesses can contribute to a circular economy, where resources are used and reused instead of discarded.
It is time for all companies to take responsibility for their impact on the planet and incorporate ESG into their operations. Integrating ESG into business decisions is not only good for the earth, but it can also be good for business. Humanity’s future depends on it.
The cost of climate change in 2022 has been estimated to be $1.2 trillion. The staggering annual tally businesses and governments have spent trying to adapt to an increasingly warmer world adds significant stress to the global economic outlook. The cost of climate change will only continue to increase as the years go on, so we must take steps now to mitigate the effects. ESG is becoming increasingly important as people become more aware of our planet’s environmental crisis. Investors are beginning to see the value in sustainable, environmentally friendly businesses, and you can make your own business more sustainable by implementing ESG policies. The progress made in the past few years is only a taste of what we can expect in 2023 and beyond.
OceanBlocks is here to assist. Our bespoke advisory team are well versed in climate mitigation strategies, and we are innovative when thinking on both macro and micro levels. Reach out to OceanBlocks today to make a permanent difference in your environmental, social and governance aspirations and help us improve our planet’s outlook.