Although the pandemic scenario remains, new debates and reflections are emerging on issues related to business, health, environment, diversity. Among these new conversations, the acronym ESG (environmental, social, governance) emerges – a term in English that strengthens a concept widely discussed until then as “sustainability”. These themes gain visibility through the credibility with which the financial market insistently addresses them.
Although the debate on ESG is relatively recent here in Brazil, the issue has been in the spotlight for some time and has been transforming the world of finance in recent years. The term first appeared in a publication called “Who Cares Win”, with the purpose of translating to investors and leaders the need to combine corporate governance commitment with social and environmental impacts.
It is worth remembering that in January this year, Larry Fink, CEO of BlackRock, the largest asset manager, published a letter addressed to investors around the world. The content brings environmental issues such as advances in combating climate change. With a speech based on studies carried out by BlackRock, the publication points to the anticipation of scenarios and predictions about financial reconfiguration and capital reallocation. It also states that this “tectonic” change will be accelerated, causing changes in investor behavior that will result in demands for more ESG products accessible to the market.
In a survey carried out by the manager, 425 investors were interviewed, from 27 countries, who manage a total of 25 trillion dollars. More than half of the participants (54%) consider that sustainable investments are fundamental to results. “These investors plan to double the share of ESG assets in their portfolios, which will increase the total percentage from 18% to 37% in five years. In Europe, the participation of ESG assets in the portfolio will be even greater, in the order of 47%.”
Among some reflections already measured, in the last few years that these letters were published, it was detected that there was an increase in investors signing the PRI movement (Principles for Responsible Investment) – in Portuguese, principles of responsible investment, which encourages investors to recognize the most responsible way of investing and managing their assets and to exercise a new perspective on risk management.
It is already clear that the impact of these three letters has caused significant changes in the agendas of many CEOs who declare their commitment to including this new tripod of macro dimensions in corporate planning and activities.
Because ESG is an expanding and challenging topic, many organizations are looking for guidance to know where to start. Considering the strong demand for positioning, it is necessary to carry out an initial analysis of the socio-environmental impacts to be managed. Among the biggest concerns regarding the environmental dimension are the management of risks and opportunities in relation to climate change. Other topics such as; use of natural resources, valuation and preservation of biodiversity, eco-efficiency and life cycle analysis (LCA) are also strongly recommended to join the environmental agenda.
Within the social dimension, topics such as; diversity and inclusion, privacy and data protection, management and relationships with stakeholders require greater attention – in this case, the challenge is linked to finding tools that help measure the aspects and impacts categorized as intangible.
The elaboration of HotSpot Analysis (HSA) provides results that can be used to identify and prioritize potential actions around ESG impacts and/or benefits.
The specialist professionals involved in direct work celebrate that sustainability has become mainstream in the business environment and emphasize that we are at the moment of this journey in which decision-making, based on ESG risks and opportunities, is the beginning of a transition that tends to accelerate and stay.
And your organization, how has it received and organized itself in response to this trend that has become a reality?
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