12/27/2023 0 Comments Epic meaning examplesMany investors endorsed ESG promises gleefully: according to PwC, ESG-focused institutional investments were poised to soar 84% between 2022 to 2026, bringing assets under management to a whopping $33.9tn (£28tn).įor firms, there was an advantage to saying they were ESG focused, such as being grouped into certain ETFs, or appealing to retail investors who increasingly wanted to align their portfolios with their personal values. Yet corporations have gladly used the ESG descriptor for all sorts of business decisions. Others believe in a broader interpretation, like faith-based investing. For instance, many people assume the term refers only to investments in green financial instruments or support for companies who pledge to reduce carbon emissions. Without a solid definition – and, often, a realistic way to action the pledge – "ESG" has come to represent different things to different people. However, an investigation might subsequentially reveal that the supplier is violating labour laws – the "S" component of the ESG-centred initiative. So, a company might turn to lithium suppliers in Latin America, that uses green electricity for their mining operations – meeting the "E" requirement of the term. You need a lot of lithium for the energy transition revolution," she says. "Let's take, for example, a lithium mining company. London-based Tara Shirvani, a London-based ESG consultant and former ESG integration lead for infrastructure projects at the World Bank, agrees that the murkiness of the wide-reaching term comes from encompassing all three words, which can make it difficult to apply in practice. And often, these ambitions are functionally incompatible. Governance refers to the framework of corporate policy, like CEO-to-employee pay ratio. A social commitment could make sure to ensuring hiring is equitable. For instance, an environmental pledge could be a net zero plan. Governance is about how we generate returns," he says. "Environmental and social is about how we serve wider society. The fragility of the entire ESG movement – and in some aspects, a major catalyst for its downfall – may well lie in its name, which has morphed into an umbrella catchphrase with little concrete meaning.įirst, argues Alex Edmans, a finance professor at London Business School, the words don't belong together. This could spell relief for firms that have faced increasing backlash for leaning into the term while failing to make any substantial changes, particularly in a time of growing public expectations around corporate responsibility. Increasingly, the ESG movement has been labelled as "woke" capitalism, and accused of enabling greenwashing.Īs a result, Taylor says that even as businesses continue to issue net zero pledges, they've stopped labelling their business decisions as "ESG". In fact, some of those ESG commitments have created myriad problems for executives, says Alison Taylor, a clinical associate professor at NYU Stern School of Business, US. However, in the years since firms announced these splashy ESG commitments, often boosting share prices and bolstering corporate reputations, the term has created more confusion – even trouble – than positive change. And after George Floyd's murder, global companies including Apple, AbbVie, Facebook, Pfizer, Johnson & Johnson and Procter & Gamble pledged a combined $340bn (£279bn) to furthering racial justice causes. French insurance company Axa vowed to cut ties with the coal industry by 2030. US telecoms company Verizon, for instance, committed to generate renewable energy equivalent to 50% of its annual electricity consumption by 2025. Across the globe, companies rolled out individual, ambitious campaigns towards net zero objectives ESG-focused investment strategies ranged, but often included transitions to green energy and divestment from fossil fuels. After weeks of intense debate, on 12 December, they emerged with a promise: 196 nations pledged to take on climate change with the goal of net zero emissions by 2050.įor businesses, this signalled the beginning of the "ESG" movement: a focus on environmental, social and governance issues in business decisions. In 2015, Paris was buzzing with anticipation as world leaders gathered for the UN's annual Climate Change Conference (COP21).
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |