ESG Insights Supporting Business, Investment and Philanthropic Endeavours

Written by Susan Marx - ESGCloud Team
30 Aug 2021

Establishing consistent and reliable ESG data is a critical step in the process of responsible and profitable business. Corporate performance no longer relies singularly on financial returns. High performance in ESG-related topics (such as climate change or online privacy-related disclosures, for instance) is important to business performance, as evidence of proven potential for returns at companies with high ESG scores is well-documented.

With the rise of green finance and an increasing interest in ESG investing brewing, philanthropy is also undergoing swifter transformation. Philanthropists today are no longer interested in just giving money to projects. They want to feel that they are part of the solution, and have been involved in decision-making. This is where ESG insights shine.

Long-term value creation for business owners, investors and philanthropists – whose ESG efforts are regularly intertwined – require strategies that demonstrate ESG impact through measurement, reporting transparency and a cohesive narrative. Below we examine how ESG Insights support the endeavours of these three entities, creating long-term value through changing expectations and actions – all spawned from data-rich ESG reports.

For the Savvy Business Owner
Transforming ESG Risks into Opportunities

At a fundamental level, ESG is a risk mitigation tool. Its data can provide new perspective to uncover potential camouflaged risks that hide beneath the surface of balance sheets and financial ratios alone. These insights provide for a more multi-dimensional perspective and deepen company-wide understandings of potential downside risk.

To minimise ESG risks and use them as launchpads for growth, companies should assess possible risks along their value chains periodically, a process that can be simplified and streamlined through ESGCloud. The fully-integrated ESGCloud reporting software delivers greater transparencies that not only recognise and quantify risk, but alert to potentially dangerous states of affairs timeously, from which resolutions can then be strategised and implemented. Against this backdrop, ESG analysis has a significant bearing on investment interest and performance, as low risk-level translates into promising investment opportunities, and the reduction of capital losses.

Companies can further distinguish themselves through benchmarking their practices against ESG industry leaders to create long-term value while utilising their transparencies to build trust in the eyes of investors.

For the Savvy Investor
Doing well while doing good

ESG reports are predicted (and expected) to continue rising in importance as investors use them increasingly to determine a potential investment’s greater financial risk due to an enterprise’s ESG practices. These are the metrics that matter. According to Natixis, a multinational financial services firm that specialises in corporate & investment banking, “the last quarter of the year [2020] proved to be a watershed moment as ESG strategies brought in record flows of $152 billion, reached record asset levels of $1.6 trillion, and drove a record number of 196 product launches.

In this regard, ESG reporting is linked to less investment volatility and supports entry into potential new markets – all of which give rise to favourable ROIs and can support long-term, sustainability strategies that kill two birds with one stone – strong financial returns through responsible investing with favourable social and environmental impacts.

For the Savvy Philanthropist
Elevating the Impact of Investments

Philanthropists’ decision-making is changing through the generations. The new, young philanthropist who has made their own money, or inherited generational wealth, often has a dramatically different attitude towards giving back than their predecessors. They are entrepreneurial in their approach to charity.

In Morgan Stanley’s 2019 whitepaper Sustainable Signals, it was reported that 95% of millennials were interested in sustainable investing, with 91% not only wishing to invest sustainably. They want to know that there will be proven returns on that investment in some capacity, whether financial, social or more to do with the experience itself. This is particularly true for pressing present-day environmental and social issues, such as plastic reduction, climate change and gender diversity. Younger philanthropists’ interest in responsible portfolios makes ESG a good way to engage in meaningful pursuits with long-term positive impact. ESGCloud reporting supports those philanthropic goals by providing accurate, measurable and relevant metrics to accurately determine the impact of their giving.

The ESG challenges of today, while vast, complex and urgent present opportunities for robust value creation and can serve as the first steps towards forging sustainable paths that support business, investment and philanthropic endeavours. But to do so, dotting of the I’s and crossing of T’s must be effected, which ESGCloud software can help bring to fruition.

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