If the past two years were the most challenging for the finance industry, 2022 is considered even more demanding and profitable. Financial institutions and markets are trying to steer the new normal. It’s because companies are reworking their strategies, delving into flexible operations, and are now more responsive to financial industry events.
Similarly, ESG practices and their elements, such as investors, stakeholders, and financial heads, are ready to create substantial demand and expectations for moving forward in the future. There will be a lot of environmental, social, and governance (ESG) issues that will affect all of them.
Why now is the time to begin with ESG investing and sustainable technology deployment
Governments, businesses, financial services
, and regulatory organizations have recognized the need to prioritize and change their working models. They discovered that the only way to secure the future is by paying attention to how businesses should be runto gain sustainable outcomes for all three Ps—planet, people, and profit.
Deloitte found that Gen-Zers and Millennials are value-driven companiesfrom ESGs and deeply concerned about environmental and social issues.”
Sarah Falcon, Financial Analyst, Object Edge
Let’s find out how businesses can accelerate their ESG investing to support the industry in making the future secure, sustainable, and revenue-oriented.
Five Ways to Accelerate ESG Investing
Create a Powerful ESG Proposition
A powerful ESG proposition can help businesses tap into a new market landscape and even expand their valuation in the existing market. In addition, such ESG practices are more likely to get rewards, such as access to beneficial investment options, approvals to trade, and licenses that offer novel growth opportunities.
Let’s understand this with the help of an example. Abig public-private infrastructure project in Long Beach, California, was recently selected by a leading financial company for social-engagement activities. These activities benefited public and social stakeholders by extracting their resources without any operational delays. As a result, the company achieved higher valuations than its competitors.
Apart from this, if you create a robust ESG proposition, it may benefit from driving customer engagement. According to a McKinsey research study, customers say they are willing to pay more to “go green.” The study also finds that more than 70% of consumers prefer to invest in a green product if it offers the same performance standards as a non-green alternative. By now, you should know that a strong ESG proposition is important if you want to increase your investing activities and grow your business.
Transparency Leads to Accountability
Maintaining transparency and sustainability in the ESG market with stakeholders is valued the most. This practice has achieved considerable appreciation over the past few years Customers, market leaders, and regulators demand access to information about companies and how their investment plans will lead to future growth.
Gone are the days when companies used to block out crucial information about their ESG activities. Today, organizationsare more responsible for their actions and commitments than ever before. Maintaining transparency is the first step towards a profitable investment and return. So, before you plan on ESG investing for your company, be ready to experience the demand for accountability.
Offer Tax Compliance
Tax compliance reflects a fair tax statement. Complying with tax laws for investing in ESG is a crucial step. However, this comes under one of the ESG policies for companies investing in it. These days, many companies employ professionals to ensure compliance with tax activities—paying no more than the legal limit. It’s because stakeholders are now looking for companies to pay a ‘fair share’ under the government’s tax policies.
Tax fairness supports overcoming tax loopholes. This is even more crucial while practicing ESG. Heading or improving ESG investing will gain strength over the coming years as businesses become more accountable for tax payments and other types of community support.
For companies, a sustainability policy may not be an essential plan, but a good policy can make the difference between a client selecting you over a competitor.”
Scott Schoeneberger, Business Analyst in Bluewater Technologies Group, Inc.
Elevate Employee Productivity
A powerful ESG investing plan must include strategies to encourage employee productivity. This can help companies attract and retain quality employees and enhance employee motivation by increasing productivity. It’s because employee satisfaction has an immediate connection with stakeholder returns. For instance, a study by Deloitte finds that the top40 companies generate 2.3% to3.8% higher stock returns per year in the U.S.
This means that there is a significant impact on the perception of an employee’s work results in the tremendous motivation of employees. Another study by Deloitte has shown that positive social impact is connected with higher job satisfaction. In a nutshell, a company’s higher purpose can encourage employees to perform better, which can lead to more capital and investment opportunities.
Driving Sustainability Through Emerging Tech
Several emerging technologies are helping companies
drive their sustainability from a growth perspective. For example, technologies such as blockchain, the internet of things (IoT), and machine learning are increasing the efficiency of remote work culture. In addition, technologies are improving supply chain efficiency by providing collaborators and partners with real-time visibility into data
, monitoring, and optimizing products and services. This ensures that businesses make more money and opens the door to more opportunities to invest in ESG projects.
The steps toward creating a more sustainable business environment lie within a business's strategies and visions. It is up to companies to seize the moment and ensure they are on track to meet their ESG commitments and invest in the right manner to retain and attract customers. The economic instability caused by the pandemic accelerated the digital transformation for many businesses and pushed them to adopt digital tools. Additionally, businesses need to think abouthow they can be sustainable and incorporate eco-friendly practices into every level of their operations. From CEO's to CTO’s, shareholders to new employees, investing in ESG projects must become a core business vision.
Embracing the Change Customers Want
A recent BCG survey revealed that the pandemic has changed global consumer behavior toward environmental issues. It was discovered that up to 90% of consumer behavior is "equally or more concerned" about the problems that surfaced as a result of the pandemic, and nearly 95% intend to change their purchasing habits. These actions can help lower "unsustainable waste, control climate change, and protect biodiversity."
Today, companies must focus on these signs and align their operations, culture, and brand image to better meet consumer expectations. Doing this will be more effective in creating the right investment plans and help discover the best ESG program that fits a business’s needs.
The pandemic had the hope of a vaccine, but climate change doesn’t. ESG is not about better branding; it is about our existential continuity.”
Monalisa Sahoo, Financial Advisor, Sterlite Power
Frequently Asked Question
Why should a company invest in ESG?
Investing in ESG is the best idea for companies to succeed and deliver profitable returns. Companies can do it by creating value for their stakeholders, such as employees, suppliers, customers, society, and the environment.
Is ESG profitable for companies?
A strong ESG program can provide substantial capital returns, emerge as amore robust corporate brand, and promote sustainable long-term growth.ESG would benefit companies and investors in the long run.
Why is ESG essential now?
ESG policies relate to internal practices that lead to effective decision-making processes and legal submission. It also allows for huge opportunities in the future, cuts costs, and builds trust amongst consumers.