While we are seeing a lot of changes form the current administration, and we are witnessing the effects of politics, both good and bad, ESG investing is far from dead. Recently there has been some political pushback, nonetheless, the demand for ESG investment opportunities is still there, especially among the younger generations, and we don’t see that going away anytime soon. In fact, we
see that investors from the Millennial and Gen Z generations are extremely aware of environmental and social issues and these investors are also set to inherit a significant amount of wealth, which in return will fuel further growth within ESG investing (1).
I am sure many people are wondering if companies are continuing with ESG strategies, and if so, how are they moving forward? Well, let’s look at companies such as Google, Apple,
and Microsoft, and what their ESG agendas look like.
Google: Google aims to achieve net-zero emissions across all its operations and value chain by 2030. They plan to reduce 50% of their combined Scope 1, 2, and 3 absolute emissions compared to their 2019 base year. Google is also investing in nature-based and technology-based carbon removal solutions to neutralize their remaining emissions (2).
Apple: Apple remains committed to its diversity, equity, and inclusion (DEI) initiatives, despite some companies scaling back their efforts. Apple strives to create a culture of belonging and continues to defend its DEI initiatives against conservative shareholder groups (3).
Microsoft: Microsoft is also steadfast in its DEI commitments. The
company's Chief Diversity Officer emphasized the importance of diversity and inclusion work, highlighting the business case for these initiatives. Additionally, Microsoft is utilizing AI systems to support its ESG and CSR (Corporate Social Responsibility) initiatives, demonstrating how technology can drive sustainability efforts (4).
I believe it is safe to say that ESG investing is not only alive, but it is evolving and will continue
to do so. Companies such as Google, Apple, and Microsoft will continue to lead the charge in sustainability and social responsibility, and it doesn’t just end there. Internationally, ESG is not only here to stay, but it is thriving and as a result we are seeing several opportunities to expand ESG efforts. Companies can align with investor expectations and build trust and have the ability to demonstrate a commitment to sustainability. They also are strengthening business strategy and
governance. Good ESG strategies translate to competent governance. Companies that can meet or exceed certain criteria around governance are able to attract more investments and build a strong reputation (3).
Another area where ESG can prevail is by enhancing data quality, which is crucial for ESG reporting. If companies can improve their data collection as well as their reporting processes, then they are able to provide
stakeholders with reliable information (4). Companies that leverage their ESG positions are also able to attract customers and build stronger business relationships (5). Finally, compliance with ESG standards is not only becoming the norm internationally, but a prerequisite for anyone wanting to enter international markets and attract foreign investors. Companies that have taken the initiative and adopted ESG practices can explore new business opportunities and achieve sustainable growth
(5).
Lastly, one of the major concerns for many is ESG investing and returns. Research has shown that companies with strong ESG practices can perform just as well as those without. For example, a study by Morningstar found that there is no significant risk/reward trade-off for investing in ESG on a global level (6). Factors that do influence ESG returns include market conditions, risk mitigation, as well as consumer preferences.
Overall, ESG investing does not mean you are giving up returns. Of course there will be variability in the returns, much like all investing, this is based on market conditions as well as specific investments. While ESG has become the center of political debate, and many believe that it may be “dead” evidence suggests that ESG investments can offer competitive returns while still promoting sustainability and social responsibility.
- corpgov.law.harvard.edu
- www.iso.org
- esg.conservice.com
- www.theglobaltreasurer.com
- www.undp.org
- www.morningstar.com
