ESG Investing: The new metrics of capital
The smart money’s search for deeper insights to detect opportunity and risk is increasingly leading top investors to scrutinize previously overlooked corporate performance factors. And how strategically an organization manages environmental, social, and governance (ESG) considerations turns out to indeed strongly correlate to financial performance and growth, according to extensive studies from Axioma, Harvard Business School, and Morgan Stanley, among others.
Since 2016, the four largest asset management firms in the world have each taken notable steps on ESG diligence ranging from defining new disclosure expectations to doubling the size of their specialized research teams. And while the integration of these considerations is now firmly in the mainstream, their applications are only just beginning, with much more impact to come yet.
The signs are clear that it’s now time for boards and the C-suite to have their hands firmly on this wheel. Not just for the essential risk-management reasons. But because some of the largest wins ahead will go to the agile, ESG-savvy businesses. Ones that learn faster than their competitors how to develop products sustainably, build deeper bonds with increasingly discerning customers, and measure and manage the multiple forms of capital—ranging from intellectual to natural, relationship, and human—that can be leveraged for advantage.
How does FrameworkESG make a difference?
The strongest organizations have always understood that staying ahead of emerging risks, managing resources efficiently, and guarding reputation judiciously are wise investments that pay handsome returns. We identify the areas of ESG performance that truly matter for your business’s success, help you understand how you’re being evaluated, where you stand vis-à-vis your peers, and how to efficiently improve those KPIs that are strategic for your objectives.
For example, we’ve recently applied our nearly 20 years of experience with financial and ESG data, stakeholder engagement, and strategic planning to:
- Partner with the CEO of a service business with one of the best performing stocks of 2017 to identify their ESG issues with the most financial impact and develop a roadmap for leveraging the associated strategic opportunities.
- Develop recommendations for the board of directors of a segment-leading apparel company on the ESG-related performance goals that will most benefit them in the next 3-5 years. The findings are based in part on an analysis of the specific ESG concerns of the company’s ten largest shareholders and gaps with competitors.
- Help an S&P 100 technology company whose market cap more than quintupled between 2016 and 2018 earn inclusion on the Dow Jones Sustainability Index.
- Guide a Fortune 100 financial services company in a disclosure strategy that led it to become a transparency leader with investors as measured by Bloomberg.
To learn more about our work, visit our services page or contact Victor Melendez, Managing Director & Chief Growth Officer, to request complimentary insights about current metrics trends and your company’s performance on key ratings.
In 2017, State Street Global Advisors completed a survey of 475 institutional investors, demonstrating the degree to which ESG factors have become a part of modern investment strategy.