It was going so well.
Before the pandemic hit, many companies were starting to recognize the increased prioritization on ESG investments. Budgets were being allocated, initiatives were being planned, steps were being taken.
But when a global health disaster hits - priorities change fast.
Suddenly, limited resources are that much more limited. Business survivability is called into question - and long-term resilience strategies are truly tested. When it comes time for budget cuts, previous commitments can be reconsidered. Is ESG really important right now? The short answer: Absolutely. Ironically, it’s times like these where the value of ESG commitments become more apparent, as do the implications of misprioritization.
“Companies with strong profiles on material sustainability issues have potential to outperform those with poor profiles.” - Blackrock Sustainability Report
A Turning Point in the Impact of ESG
COVID-19 has become a serious wake-up call for companies when it comes to highlighting the importance of ESG strategy. It has put forth an unavoidable question: How well is your company set up to withstand (or even thrive) in the case of an unforecastable event?
There’s a reason why the majority (55%) of polled investors in J.P. Morgan’s massive survey believed that the pandemic would have a positive impact on ESG investments. COVID is proving to be a true test of a company’s capabilities and resilience in dealing with low-probability scenarios. Companies with well built-out ESG strategies are showing that a focus on long-term sustainability actually matters in practice now, not just in the future.
Other reports are confirming that there’s a growing spotlight on ESG matters. Blackrock recently released a comprehensive survey on sustainable investing that call out ESG investments as crucial to improving long-term outcomes.
“In our research, we analyze performance differences between ESG indices and their core, non-ESG, versions, as well as ESG-managed funds versus their peers, and we find that the majority of ESG-tilted portfolios have outperformed their non-sustainable counterparts during this year’s market downturn.”
They also go on to note how investor preferences are shifting towards sustainable portfolios as a whole. It makes sense from any angle - if a business does well in relatively harmonious times, that doesn’t automatically indicate that that operational success will carry over in times of uncertainty. When times get rough, you don’t want to see your investments falling apart because they didn’t allocate enough resources into ESG.
A New Business-Defining Factor
It may have taken a pandemic - but companies are waking up to the fact that ESG is a critical pillar to build your business around, not simply a requirement for placating regulators. The increased focus on ESG investments as a signal for sustainability performance isn’t likely to go away any time soon.
Going forward, it’s likely that there will be even more scrutiny on a company’s ESG initiatives - from investors and the public alike. When it comes to mergers and acquisitions, we’re already seeing ESG strategy become a key factor of due diligence.
There’s no longer a question about if ESG issues relate to the core of business, it’s about what strategies your company can employ to best equip itself for the uncertainties of the future and the demands of the present.
While doubling down on ESG won’t necessarily make your company TOTALLY disruption-proof, it can go a long way towards improving hardiness and continued operation in the face of uncertainty - enough to make a serious difference.
At Antea Group, our experienced consultants help you develop and refine ESG initiatives that strengthen your business while developing a sustainable ecosystem for the best long-term outcomes. Our experts can help foster stakeholder buy-in and clearly communicate value to relevant internal and external parties.
Curious where to start? Drop us a line or check out our service offering, a Sustainability Transaction Assessment Report (STAR).Sustainability Transaction Assessment Report (STAR)
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