ESG stands for Environmental, Social and Governance and is related to business and investment practices that take socio-environmental criteria into account when making business decisions.
This is a strong trend that has gained even more relevance in recent years due to discussions on environmental preservation worldwide. The analysis criteria go beyond traditional economic-financial metrics, which allows companies to be assessed from the point of view of social responsibility.
This acronym hides a revolution in the way of investing, impacting the financial market with significant changes, as these criteria allow the investor to have a broader and longer-term view, in which several aspects are considered for the decision to allocate resources.
In this scenario, concepts such as conscious capitalism promoted an engagement never seen so much by employees, customers, and investors, which forced a change in the behavior of organizations.
The organizations realized that the incorporation and dissemination of these new perspectives generated significant returns for the business, which often proved to be above the market average.
In other words, the motto of ESG is: it is not enough to generate profit, a company must fulfill its social and ethical role, considering the issues that impact people, the planet and the environment.
The way forward is to literally embrace sustainability as a primary factor, carefully analyzing how your business can act in this direction.
What to do to make your ESG successful?
The first step is to understand in depth this new trend the global context in which it is inserted, and then to identify in the organization itself which ESG factors are relevant.
From there, it is necessary to understand the relevance of the concept to investors and its impacts on the stock market, only to start thinking about disseminating information related to ESG issues, through sustainability reports.
However, this is not an easy task, as the analysis is complex and even involves the regulatory aspect, that is, in terms of sustainable development, including considering the management of the risks of climate change.
According to a survey by the international brokerage, currently in the world, more than US $ 30 trillion in assets are managed by funds that have defined sustainable strategies.
The survey also points out that in Europe it is US $ 14.1 trillion, equivalent to more than 50% of the continent’s sustainable assets, while in the United States this figure already represents approximately 25%.
Analyzing these significant amounts, it is not difficult to understand that the criterion of “responsible investment” has been widely used by the big players when allocating their investments.
Companies need to see ESG not only as a way to raise funds, but to adopt a posture that seeks effective results.
Unfortunately, the practice of the so-called Greenwashing is very present in the world, this term is used to identify companies that adopt postures in defense of the ESG principles only on the façade, not consistent with the actions promoted by the company.
According to an international study, most managers consider the potential impact of ESG issues on their investment process, but only 11% have a specific area, 18% have employees directly involved as the theme, and only 5% have a specific committee to evaluate ESG investments.
The Coronavirus pandemic motivated large companies to mobilize, creating structural and solidary actions, to contribute effectively to the management of the health crisis.
This is an excellent example of the mentality of the company concerned with ESG, that is, the company that acts, which creates mechanisms that make practical actions feasible and seek effective results in this area.
Companies that do not understand and are not aligned with this scenario, will certainly lose in competitiveness, and will be devoured by competitors. In addition, ESG is not static, it is in constant motion, requiring companies to constantly reinvent themselves.
Did you like to know more about the first steps to deploy your ESG? Share this information, it can be useful for someone!