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As ESG investment and goals expand and the sector evolves, expectations grow for more accountability and data

Published by Business Insider on Mon, 03 May 2021


<p><img src="https://static4.businessinsider.com/image/608c16a134af8d001859a22b-2400/climate%20summit.jpg" border="0" alt="US envoy for climate John Kerry, US Secretary of State Antony Blinken, and US President Joe Biden listen as United Nations Secretary General Antonio Guterres speaks on screen during a climate change virtual summit on April 22, 2021, in Washington, DC" data-mce-source="Brendan Smialowski AFP via Getty Images" data-mce-caption="US envoy for climate John Kerry, US Secretary of State Antony Blinken, and US President Joe Biden listen as UN Secretary General Antonio Guterres speaks on screen during a climate change virtual summit on April 22, 2021, in Washington, DC"></p><p></p><bi-shortcode id="summary-shortcode" data-type="summary-shortcode" class="mceNonEditable" contenteditable="false">Summary List Placement</bi-shortcode><p>Companies are increasingly setting environmental, social, and governance (ESG) goals, as systems to measure the impact of ESG initiatives are evolving to meet the moment.</p><p>The momentum could be a driver of new areas of business transformation, particularly if companies focus on outcomes in diversity, equity, and inclusion (DEI).</p><p>The increased focus on ESG is unmissable. During a Transforming Business <a href="https://www.businessinsider.com/how-the-pandemic-helped-drive-a-surge-in-esg-demand-2020-12">roundtable</a> in December, Insider asked the panel about a reported surge in demand for ESG investing, fueled at least in part by the pandemic.</p><p>"Millennials are value-led investorsand they're getting older and they're getting wealthier," said <a href="https://www.businessinsider.com/tb/the-list-of-300-people-transforming-business-in-2020-9/transformers/edward-lees" data-analytics-module="body_link" data-analytics-post-depth="60" data-uri="6a48ed79a1e60da038f9fc78151d00a3">Edward Lees</a>, a senior portfolio manager at BNP Paribas Asset Management, and a 2020 Transformer. "So this whole demographic of up-and-coming, value-led, climate-conscious people is being joined at the same time with an explosion of democratizing investment products where you can go on your mobile phone and pick a theme and press a button."</p><p>The focus on ESG goes beyond individual millennial investors, however, as fund managers and insititutional investors are under increasing pressure to include ESG offerings for their clients and to supplement their own holdings.</p><p>A recent Transforming Business poll* of 614 business decision-makers showed that 60% of respondents their company had set formal ESG goals. Greenhouse gas emissions topped the goals set, followed by water consumption and carbon offsets. Equity and social justice, and diversity and inclusion were also among the higher priorities.</p><div><iframe title="Areas that companies have set goals for that fall under ESG frameworks" aria-label="chart" id="datawrapper-chart-dhApT" src="https://datawrapper.dwcdn.net/dhApT/1/" scrolling="no" frameborder="0" style="width: 0; min-width: 100% !important; border: none;" height="651"></iframe><script type="text/javascript">!function(){"use strict";window.addEventListener("message",(function(a){if(void 0!==a.data["datawrapper-height"])for(var e in a.data["datawrapper-height"]){var t=document.getElementById("datawrapper-chart-"+e)||document.querySelector("iframe[src*='"+e+"']");t&&(t.style.height=a.data["datawrapper-height"][e]+"px")}}))}();</script></div><h2>Measurement and accountability</h2><p>The pressure is on to quantify ESG investment and outcomes, including at the US government level where newly confirmed SEC chairman, <a href="https://www.businessinsider.com/esg-sustainable-investing-asset-management-wealth-management-blackrock-biden-gensler-2021-1">Gary Gensler</a>, is expected to focus on ESG reporting. President Joe Biden's <a href="https://www.businessinsider.com/summit-shows-biden-big-vision-on-fighting-climate-change-2021-4">Leaders Summit on Climate</a> solidified this administration's commitment to tackle global warming.</p><p>In February, Allison Herren Lee, at that time the acting chair of the SEC, released a <a href="https://www.sec.gov/news/public-statement/lee-statement-review-climate-related-disclosure">statement</a> signaling the admistration's increased focus on these initiatives. "Now more than ever, investors are considering climate-related issues when making their investment decisions," her statement read. "It is our responsibility to ensure that they have access to material information when planning for their financial future."</p><p>In September, the World Economic Forum (WEF) and the International Business Council (IBC) partnered with major accounting firms to create the reporting framework of 21 ESG standards, and <a href="https://www.businessinsider.com/60-major-companies-agree-to-start-reporting-on-esg-metrics-2021-1">more than 60 companies</a> have agreed to adopt the framework.</p><p>The greater the accountability from companies, the greater the potential rewards, as investor appetite for these products grows. "The truth is, being an ESG leader does not guarantee your financial and business success, says Martin Whittaker, CEO of JUST Capital. "It's way more complicated than that. You have to be able to assess what are companies really doing across environmental, social, and governance issues, how does that really relate to company's short term accounting and financial performance, and how can i use that as an investor'</p><h2>ESG, DEI, and business transformation</h2><p>As companies race to implement ESG goals and operations, progress in these areas may drive new levels of business transformation. Diversity, equity, and inclusion (DEI), which are core tenants in the "social" portion of the ESG framework, is a crucial factor for driving products and programs that fuel innovation.</p><p>"The process of innovation as it happens within companies, and the beneficiaries of innovation, i.e. the customer, are all wrapped up in the "S" of ESG," Whittaker said. "Knowing your customer, knowing your supply chain, what your customer wants and how you are meeting those needsall that requires a diversity of perspectives and backgrounds, and requires companies to rethink how they do that."</p><p>"Your progress towards innovation could be stifled if you're not pursuing a DEI strategy," he said.</p><p></p><p></p><p></p><p></p><p><em>*This SurveyMonkey Audience poll targeted individuals who work in a management capacity at their company according to the Audience panel. They included respondents from Hong Kong (n=50), Singapore (n=50), The United States (n=207), Canada (n=104), France (n=52), the United Kingdom (n=51), Germany (n=50) and India (n=50), with local translations in Germany and France. Respondents are incentivized to complete surveys through charitable contributions. Generally speaking, digital polling tends to skew toward people with access to the internet. SurveyMonkey Audience doesn't try to weight its sample based on race or income. Polling data collected total of 614 respondents March 3-4, 2021.</em></p><p><a href="https://www.businessinsider.com/esg-goals-investment-accountability-growing-2021-5#comments">Join the conversation about this story &#187;</a></p>
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