How Are The Current Investment Trends Being Affected By Environment, Social and Governance (ESG) Factors?
Nobody knows the point when sustainable and ethical investment strategies became vital considerations for asset managers, investors and shareholders. A shift is happening on the global investment focus to investment managers, investors and shareholders. What is being seen is transfer of wealth to millennials, an increase in the costs and risks, disasters in the environment and enhanced management performances using practices that are controlled.
Senior executives agree that environmental, social and governance (ESG) factors are valuable to making decisions on investments. There is an evident disconnect where only 60% of companies have a strategy that is sustainable and also only 25% have designed a business case for continuity.
ESG includes a broad range of results on the return and risk values of any investment. Reputational or strategic risks, direct impacts on finances, business ethics, and regulation changes are some issues that can affect any investment. The risks include environmental, clean technology, pollution, climate change, waste and natural resources. Human resources, human rights, local community, and health and safety are the social risks included. The governance factors has risks such as board and shareholder levels, employee conflict of interest, reporting, regulation, and compliance.
The shift from important business approaches to considering the medium and long-term results of the business decisions in EST will have an impact on the market. The markets that will be affected include multinationals, listed businesses, large corporates, healthcare, agribusinesses, supply chain, manufacturers, suppliers, and small to medium businesses. Our economy is driven by capital flow and investments then the complicated ecosystem of the global economy knows the importance of maintaining ESG strategies in areas where funds are to be raised.
Some countries are yet to agree to the appreciating the ESG business policy as they deem it not cost effective. Those countries don’t think that reporting ESG for listed business is not important, further even investing in risk reduction strategies is low.
Some investments can benefit more than others on the variation of environmental results on business functions. Environmental risks can be quantified but with lots of challenges when monetizing it but changing to an economy of low carbon is the main driving force. A low carbon economy needs investing in enhancing effeciencies in operations of water, waste and energy through the use of clean technologies.
Social risks and impacts require evaluation of the immaterial traits of a business which cannot be detected on balance sheets. The characteristics are sustainable supply chains, community engagements, health and safety, customer relations, employee productivity and culture. Improving on ESG performance is the chance that any listed or private business has.