Why ESG reporting needs to balance ‘purpose with profit’ for real impact
- ESG investing is increasingly viewed as a lever for delivering value in a turbulent world.
- But there is a lack of transparency around reporting and companies aren’t obliged to change their business practices.
- Companies need to go well beyond environmental regulatory requirements and drive social impact.
The flow of capital towards ESG (environmental, social and governance) oriented funds has rapidly moved from a trickle to a deluge.
In the third quarter of 2021 global sustainable funds hit a record high of $3.9 trillion, more than doubling in less than 12 months. This trend reflects growing interest from private equity (PE) firms and some of their biggest investors in renewable energy and energy transition companies like battery makers, and to a lesser extent, emerging sectors like sustainable agriculture and recyclable/circular production.
Increasingly, ESG investing is seen as a lever for delivering value in a volatile world. With fuel prices rising to new heights, energy-efficient businesses, which are less dependent on raw materials, are likely to have a far more reliable cost base. Similarly, companies that can demonstrate sustainable supply chains and good human rights records are less vulnerable to environmental shocks or reputational damage.
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