I have survived the worst ESG backlash since the term was invented. Today’s ESG Critics Are Running Out of Ammo

In 2007, I co-founded the investment firm Auður Capital in my native Iceland. We aim to incorporate more “feminine” values ​​into finance, with the important philosophy that we will pursue profit with principles and address environmental, social and governance issues. at the heart of our investments.

The following year, a global financial crisis collapsed Iceland’s financial industry – a black swan event that swept reality under our feet. Our company is the only property management company that is still intact. We have gone from being ridiculed by some in the field to being widely trusted by a rapidly growing customer community.

Time and team are, of course, crucial, but it’s our vision and principles that set us apart. We reject the notion that women are risk averse. We now believe that gender balance in business and finance will improve risk awareness and better position companies to navigate future risk – and black swan events. the end always comes.

“Black swans seem to regularly swoop in from all directions,” wrote Fortune CEO Alan Murray in Daily CEO on August 30th. He’s right; sure feels like he’s right. As the world emerges from a century-long pandemic, people in nearly every corner of the world are grappling with at least one unprecedented climate event – extreme heat, devastating fires, catastrophic floods, historic droughts – and the cascade effects that often follow, such as disaster relief, food crises, economic hardship and social unrest.

Europe is facing a particularly serious emergency, due to Russia’s ongoing war in Ukraine. The energy crisis of the continentAlexa Capital’s co-founder, Gerard Reid, warns that “seismic shocks that are too great can destabilize an entire ecosystem: the social, economic and political fabric of Europe.”

These are ESG problems, whether we call them that or not.

For decades, financial managers tended to look in the rear-view mirror, prioritizing past performance over future risk perception. Today, we only need to read the latest Wall Street analysis to get a feel for the potential of black swans on the horizon.

For business leaders, Risk perception and resilience are new must-haves. If you want to prosper, here’s the question to ask: Is our business prepared to weather the coming storms?

A perception of risk alone won’t guarantee prosperity, but businesses lacking in resilience can find it difficult to access capital when they need it most – such as the recession that broke out in Europe, and climate and ecological degradation continue to occur. Property owners and managers are prioritizing resilience; Their actions are neither politically motivated nor ideological. It is a mandated duty and responsible business, clear and simple.

ESG is ultimately about building resilience for people, our common planet, and businesses. It’s about measuring what matters — about equipping companies with the knowledge and self-determination to survive and thrive in an ever-changing and uncertain world. It’s about arming investors with the powerful data they need to build truly sustainable portfolios.

My friend Mindy Lubber wrote a great comment for Reuters Last month, crystallize the choice confronting business leaders, investors and policymakers. “The bottom line is that the impact of climate change will mean one of two things for companies’ long-term prospects,” she wrote. “Their resources and assets will be at serious risk, or they will avert the worst risk because our society transitions to a cleaner economy. That means investors and companies that are best prepared to weather the final storms and facilitate the energy transition will be the winners in the decades ahead. next century. “

ESG’s recent backlash, which prompted a reaction from Mindy and a host of others, was regrettable but inevitable. In one day August 26order essay, Morningstar’s Jon Hale diagnosed reasons behind the anti-ESG pushespecially in the US: political discontent, fossil fuel protectionism and anti-stakeholder capitalism.

Certainly ESG is a toolkit, not a panacea. And it’s far from perfect. The sea of ​​related acronyms is off-putting to many. The lack of meaningful and comparable data is a major obstacle that investors face. The fragmentary context of the ESG report continues to breathe life into the “green wash,” allowing some companies to tap into sustainability rhetoric without combining words with action. meaningful. These are dilemmas we have to acknowledge and deal with.

But the ESG backlash is here because the big picture is real, and momentum will not disappear. “More than 90% of S&P 500 companies have now released ESG reports. This year’s ESG will exceed $40 trillion in assets. The amount allocated to sustainability funds reached about $2.5 trillion at the end of June,” according to the report Bloomberg.

Leaders who attack ESG adoption and cling to “business as usual” are terrified because their old power play is under threat – from old powerful capitalists to politicians opportunist in the United States and elsewhere. Business as usual is how they hold power. ESG gets it right is fundamentally about transparency, and transparency gives power to everyone. It is the impetus to restore trust and catalyze confidence in our ability to navigate together in the decades to come.

This is why we need a global baseline for ESG disclosure: bring clarity and consistency to sustainability reporting so businesses and investors can compare apples with Apple. I applaud the efforts of Team Leader B Emmanuel Faber in his new role as president of the International Sustainability Standards Board (ISSB), which is developing a global base of sustainability claims standards. – a common language that allows investors to assess the risks and opportunities for sustainable development of companies. “The ISSB’s sustainability financial statements will be the language of recovery for capital markets,” Emmanuel shared with me in a blog post. New Catalyst’s conversation interview. We invite you to watch.

Support for the ISSB’s efforts is growing, including by the G7 and G20, global financial regulators, the IMF, the UN and others. Ultimately, the ISSB is a vehicle to encourage sustainable business practices, solve the problem of ‘green cleaning’ and enable capital allocation for more sustainable investments.

Business leaders have the opportunity to show their support in a number of ways:

  • Engage formally with the ISSB as it develops its reporting standards, ensuring that the supporting voices of business are seen and heard;
  • Advocating publicly and privately for the adoption of the ISSB baseline, engaging policymakers such as the European Commission and the US Securities and Exchange Commission; and
  • Commitment to voluntary acceptance of ISSB standards.

Through adopting a common language of sustainability, we can unleash the best in ourselves and the system as a whole, fostering ambition, action and accountability to build a world that is resilient. serve and protect us all.

Halla briefly is the CEO of The B. Team.

Opinions expressed in commentary are solely those of their authors and do not necessarily reflect the opinions and beliefs of Luck.

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