With anti-ESG sentiment on the rise around the world, it would not be surprising if executives and business leaders chose to steer clear of the term. However, according to a survey conducted by JTC, nearly 3/4 of stakeholders across multiple continents shared that they still considered ESG ratings and metrics when making investment decisions. 70% of respondents believed that impactful ESG strategies do not have to come at the cost of reduced profits. While the anti-ESG voices tend to be the loudest, there is still a great amount of momentum behind the ESG movement. However, the survey also found that many people are not aware of what exactly ESG entails. Going forward, executives must be clear and communicate the goals of ESG and impact investment to avoid confusion.

In order to keep that momentum going and develop strong corporate ESG strategies, business leaders and board members need to be informed. Competent Boards’ best-in-class ESG and Climate & Biodiversity programs educate participants on important ESG topics such as cybersecurity and AI, diversity and inclusion, climate change, and more. 

1. Water scarcity worries investors. Companies and communities around the world are facing issues due to water scarcity. Currently, there are US$15 billion worth of stranded assets due to water stress. As climate change exacerbates drought around the world, this issue will only get worse. Institutional investors such as BlackRock are beginning to consider water risk when making investment decisions. Water access is highly regional, meaning that a company’s water risk can vary greatly from one operating site to another. For this reason, mitigating water risk is complex and difficult with detailed mapping technology required to determine water availability in a region. Despite this, companies must act now to secure their supply chains and operations proactively.

2. Global impacts of ESG legislation in the European Union. In 2023, the European Union (EU) passed a Green Deal into law, a landmark piece of legislation outlining the EU’s plan to transition away from fossil fuels. It is also the first place in the world to pledge that it would be carbon neutral by 2050. The EU’s leadership on climate action and emission mitigation will have impacts around the world. The Green Deal focuses on climate and carbon, greenwashing and transparency, energy, transport, and circularity. It includes carbon border adjustment mechanisms, a ban on products that use materials grown on deforested land, sustainability reporting requirements, a phase out of internal combustion engines, right to repair legislation, and more. The EU has always been a leader in climate change mitigation with the rest of the world looking to them for guidance, and this Green Deal will be no different.

3. Some banks see ESG as a risk, others as an opportunity. A study conducted by Bain found that banks around the world are torn between considering ESG a source of risk and a new opportunity. This varied geographically, with 60% of European banks surveyed stating that ESG was an opportunity for value growth. In America and Asia Pacific, less than 33% of respondents felt the same. One of the primary opportunities that ESG creates for banks is loans for environmentally friendly projects and products such as loans for green building retrofits and electric vehicles.  65% of banks admitted they did not take climate factors into account when underwriting credit, but about 25% plan to begin in the next year.  

4. Wavering confidence in the energy transition. As cost of living and energy crises worsen around the world, in part due to Russia’s invasion of Ukraine, consumer confidence in the transition away from fossil fuels in energy generation is dropping. Despite record investments of over US$ 1 trillion in clean energy technology in 2022 speeding up the transition by a decade, high costs of living impact consumer confidence. When confidence is low, consumers spend less money which results in reduced investments in clean energy solutions. Without high confidence, governments and corporations are also less likely to act in support of the transition. 

5. Groundbreaking method developed to measure business impacts on biodiversity. A team of scientists at the University of Jyväskylä in Finland have created a way for companies to measure the impact of their operations on biodiversity. An interim report published uses their method to measure the biodiversity impacts of S Group, a Finnish retailer who partnered with the university for this project. Companies around the world already track their carbon emissions, so developing a biodiversity impact calculator will be hugely beneficial. Companies typically point to a lack of tools and frameworks as a reason for not taking action against biodiversity loss, but this newly developed method will solve that. The final report outlining this method will be freely available once it is published.

Ira Srivastava is Competent Boards Program Coordinator. Follow Competent Boards on LinkedIn.

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