What is ESG and how it helps you attract the right investors?

August 30, 2021
Pic credit: Unsplash

ESG stands for Environmental, Social and Governance and it’s not new, it’s been around since 2015 but it became an important acronym since 2019 According to Mckinsey “ESG-focused investing has experienced a meteoric rise. Global sustainable investment now tops $30 trillion—up 68 percent since 2014 and tenfold since 2004. The acceleration has been driven by heightened social, governmental, and consumer attention on the broader impact of corporations, as well as by the investors and executives who realize that a strong ESG proposition can safeguard a company’s long-term success. The magnitude of investment flow suggests that ESG is much more than a fad or a feel-good exercise.”

In recent years retail investors UK and EU have increasingly become more responsible with their money and lifestyle. They demand ESG-sensitivity from the enterprises that they do business with. Consumers are increasingly conscious of their own actions and those of brands. There is a growing trend toward eco-conscious spending and consumption among people who want to turn their purchases and rewards redemption into meaningful action for the planet.

To create an ESG implementation strategy and ESG company analysis that would help you attract business investors all three components need to be carefully understood and taken into consideration. 

Let’s begin with the “E”

The environmental aspect of ESG splits into two parts. The first part of the E is climate change, and energy a Company uses to power our world, therefore, it’s all about carbon impact. The second part of the E is all about natural resources and their impact on biodiversity, the effect the Company has on the water systems of our natural ecosystems.

Here is a full list of its components of how to attract investors in detail:

Here is a full list of its components in details:

  • Biodiversity Impact Reduction
  • Carbon Offsets/Credits
  • CO2 Equivalent Emission Total
  • Eco-Design Products
  • Energy Use Total
  • Environmental Expenditures
  • Environmental Products
  • E-waste Reduction
  • Green Buildings
  • Hazardous Waste
  • Hybrid Vehicles
  • Policy Energy Efficiency
  • Policy Water Efficiency
  • Renewable Energy Use
  • Targets Emissions
  • Waste Recycling Ratio
  • Water Recycled
  • Water Technologies
  • Water Withdrawal Total
  • Estimated CO2 Equivalents Emission Total

Now let’s look at the “S”

The “S” splits in two parts internal stakeholders and external stakeholders. The internal stakeholders are basically your own workforce. So that's diversity, equity, and inclusion, work force, wellbeing, workforce safety and health, for example. And the external stakeholders look at, the broad corporate human rights and the effect the Company has on the wider society around it, particularly from a human rights dimension.

Here is a full list of its components in details:

  • Accidents Total
  • Average Training Hours
  • Customer Satisfaction
  • Day Care Services
  • Donation Total
  • Employee/Contractor Facilities
  • Employee Satisfaction
  • Flexible Working Scheme
  • Health and Safety Policy
  • HIV/AIDS Program
  • Human Rights Policy
  • Improvement Tools Business Ethics
  • Lost Time Injury Rate
  • Lost Working Days
  • Management Training
  • Policy Child Labour
  • Policy Diversity and Opportunity
  • Quality Management Systems
  • Supply Chain Health & Safety Training
  • Trade Union Representation
  • Training Costs Total
  • Turnover of Employees
  • Women Employees
  • Women Managers

And finally let’s look at the “G”

The “G” also splits down into two parts when it comes to figuring out how do you attract investors. The first part of the G is what we can call traditional corporate governance for public companies. And that’s all about shareholder rights, shareholder protections and treating all shareholders equally and fairly. Whereas the second part of the G is corporate culture and business integrity. So risks such as bribery, corruption, money laundering, and how the company ensures that its culture is one in which integrity and compliance is deeply ingrained.

Here is a full list of its components in details:

  • Anti- Takeover Devices
  • Audit Committee Independence
  • Board Cultural Diversity
  • Board Meeting Attendance Average
  • Board Member Affiliations
  • Board Member Compensation
  • CEO-Chairman Separation
  • Classified Board Structure
  • Compensation Committee Independence
  • CSR Sustainability Committee
  • CSR Sustainability External Audit
  • CSR Sustainability Report Global Activities
  • Female On Board
  • Global Compact
  • GRI Report Guidelines
  • Highest Remuneration Package
  • Policy Board Diversity
  • Policy Board Experience
  • Policy Board Independence
  • Policy Board Size
  • Policy Equal Voting Right
  • Shareholders Vote On Executive Pay
  • Voting Cap %
  • Staggered Board Structure

ESG investing is booming but how?

According to the Corporate Finance Institute “ESG investing, despite the criticisms, is becoming increasingly popular and is most likely to be an investing approach used by millennials. Morgan Stanley Bank recently conducted a survey that found nearly 90% of millennial investors were interested in pursuing investments that more closely reflect the values they hold. By 2018, approximately $12 trillion worth of investment assets were selected using a socially responsible investing strategy and according to research by asset management practice Montfort Communications it found that

  • Seventy Eight percent of 18-34 year olds said that ESG considerations affect their investment choices compared to 67% among the 35-54 age group and less than a third, 32%, of the 55+ demographic.
  • Nearly two-thirds (63%) of 18-34-year old said they would choose a new fund manager based on their approach to ESG compared to just 17% of the 55+ age group.Women investors have a stronger conviction in ESG than men with over half of women, 53%, saying they would choose a new manager based on their approach to ESG versus only 37% of men. It clearly shows that answer to how to attract investors for startups is hidden in its ESG compliance standard.
  • Women investors have a stronger conviction in ESG than men with over half of women, 53%, saying they would choose a new manager based on their approach to ESG versus only 37% of men.

If you wish to start communicating your ESG journey how your company is impacting people and planet do get in touch Here.

So lets look at some of the trends that are supporting this ESG investment phenomenon

  • According to new research by Close Brothers Asset Management, Nearly two thirds (65%) of investors prioritise responsible investing over a desire to ‘simply maximise’ their financial return.
  • In another recent survey of more than 2,000 UK investors, who currently have a mean average of £320,000 invested, just 35% identified as ‘traditional’ by answering that ‘my only priority is to maximise my financial return’. Notably, there is a gender divide, with 40% of male investors considering themselves traditional, compared to 31% of women.

In summary, ESG company analysis is not a trend that is creeping up and it will go away. The data is telling us that it’s here to stay and if a company is to succeed in attracting investors to your business it needs to look deeper into its ESG and how it’s affecting people and the planet.

We are Communique and we are a team of Environmental, Social and Governance (ESG) Communication specialists and Technical experts who will design your best sustainability strategies, initiatives and communication campaigns suited to your sector and desired impact and connect it with your business value. Get in touch if you wish to learn more about ESG company analysis and how to communicate it.


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