Post by account_disabled on Feb 22, 2024 13:09:39 GMT 8
Even before the COVID-19 pandemic struck, there was a growing clamor around the need to integrate environmental, social and governance (ESG) factors into business and investment decisions, taking into account a broader range of stakeholder interests . This was intensified by the pandemic and the death of George Floyd , which brought social and equality issues to the forefront. However, some continue to cling to old orthodoxies, accusing ESG investing and stakeholder capitalism of delivering inadequate returns and failing to produce any meaningful change for society as a whole. The reality is that this is not feasible. ESG investors try to avoid companies that aggravate the world's problems and increase risk, and instead: They seek to direct capital towards those that provide solutions. They reduce the risk. They increase long-term value. Deny ESG ROI Going against this common sense approach is challenging at best. So the skeptics' case against ESG investing typically rests on the construction of numerous "scarecrows." Denying ESG Investment Returns… Is Like Denying Gravity First, there is the claim by ESG advocates that shareholder profits can always be aligned with social good.
But in reality, the starting point for ESG investors is different: risk mitigation. As noted in Edelman 's regular survey of institutional investors, a company's ability to manage ESG factors is widely viewed as an indicator of prudent risk management, and rightly so. Earlier this year, Société Générale examined the impact of ESG-related controversies and found that in two-thirds of cases a company's stock Bulgaria Mobile Number List experienced sustained underperformance, dragging down its peers over the course of the next two years. . This is because companies are not isolated from the communities in which they operate. They need people to buy their products, staff their workplaces, provide a supportive environment, etc. Deny ESG ROI In fact, they need climate change to be reversed. If not, that will certainly not be conducive to making profits. The license to operate for businesses is granted by citizens through a democratic government, and will necessarily be limited and compromised if the interests of customers, employees, suppliers and local communities are not adequately taken into account. Edelman's study Edelman recently published a study on the fundamental role that the public expects brands to play during the pandemic. Most respondents said they had already punished companies they perceived to be doing the wrong thing, and a third said they had convinced other people to stop using a brand they felt was not doing the right thing.
Deny ESG ROI The Range of ESG Investor Approaches Critics also like to claim that, when building portfolios, ESG investors are obsessed with exclusionary selection and divestment from certain industries such as fossil fuels. In reality, ESG investors deploy a range of approaches, including: The negative selection. Selection based on norms against minimum standards. The positive selection. And when it comes to fossil fuels, it is recognized that while cleaner alternatives to coal can be deployed at scale – which would justify the exclusion of the entire sector – the same cannot be said for oil and gas, where incentives to transition They can be more productive. Deny ESG ROI You also hear the claim that investing in ESG and stakeholder capitalism is against the law, as it can conflict with the financial interests of retirement plans. The law firm Skadden recently produced a memo for Harvard Law School that debunks this line of argument, making clear that the statutory mandates and fiduciary duties of directors allow for the interests of stakeholders to be taken into account. ESG skeptics often end their case by saying that it is not the place of companies to try to change the world, but for politicians and governments to regulate and set the right rules.