Companies worldwide are under immense pressure to affirm their commitment to tackling environmental, social, and governance issues. As real-life consequences of ESG issues become more pronounced, companies and businesses are being called to action. The result has been the tremendous growth of the ESG consulting field that most corporations turn to help.
Corporations that have relied on the general public for growth and shareholders’ value. Over the years are coming under scrutiny to save the human race and environment at large. Likewise, ESG consulting firms are increasingly doing their part in shedding more light on the issues. What needs to be done on the investment front.
However, public companies are already feeling the pressure as shareholders pass resolutions requiring them to concentrate on addressing ESG issues while pursuing market returns. Gone are the days when corporations would only face off with philanthropists or a small group of investors. ESG consulting firms, have shed more light and provided more insight to investors. That they are using to counter whatever is thrown at them by big corporations.
More than ever, investors are equipped with valuable data to challenge corporations on what they ought to do on the ESG front. Annual General Meetings have turned out to be battlefields where shareholders push for resolutions on the environmental, social, and governance issues.
Ekaterina Chernova, the Managing Partner at The Altruist League, said, “Investors backing environmental, social and government resolutions at annual meetings should continue to pile pressure on companies. Likewise, companies will have no option but to address investors’ concerns or face the wrath of bad airplay that could dent their image.”
Activist investors are leading the fray in requiring asset managers to file resolutions. On what they are doing and what they intend to do to address climate change. The idea is to get companies with big operations to do their part in trimming carbon emissions and address other issues. That is facing society through investments.
ESG consulting firms shedding light on how investments can go a long way in addressing societal and environmental issues. That has also caught governments’ attention. As it stands, governments and authorities are increasingly playing a pivotal role in encouraging ESG activities. Further piling pressure on companies.
In the US, the Biden administration has already made it clear that sustainability is one of its top priorities. Likewise, there is a growing talk for new legislation requiring companies to disclose more information. On what they are doing to curb carbon emissions. The government and investors are also piling pressure on companies. To reveal the diversity of their workforce, among other sustainability disclosures.
President Joe Biden is already living up to his promise of curbing carbon emission. The cancellation of the Keystone pipeline is a perfect example of how government pressure on the ESG front can derail projects that don’t meet sustainability thresholds.
While on the campaign trail, Biden reiterated that he would require companies to detail environmental risks and greenhouse gas emissions. There is no doubt that the same could come into effect as the US looks to curb carbon emission by 2030.
ESG Disclosures Standardization Push
In recent years the number of companies reporting their sustainability efforts has increased. Last year alone, more than 70% of S&P 500 companies delivered sustainability reports. However, the lack of rules that govern how companies report their sustainability activities is a big tailwind that needs immediate addressing.
The absence of ESG reporting rules is presenting lots of challenges and unnecessary costs. Companies are being forced to respond to a range of requests from investors and community all with different interests,” said Milos Maricic. The Altruist League president.
Additionally, the lack of standards and regulations could force companies to cherry-pick ESG activities to make public. In this case, they will always be at crossroads with regulators and investors. Who may feel they are not doing much or hiding something.
There are already calls for the drafting of new rules that will govern ESG disclosures. Such rules coming into play would level the playing ground. However, it could amount to immense pressure on companies whose operations don’t foster sustainability.