Environmental, Social and Governance Moves to the Mainstream from the Margins

Posted by: YijunW

Environmental, social and governance criteria (ESG) is often regarded by investors and management groups as non-financial and thus not the top priority. This suggests that there is no physical or material impact on the companies and the society, either as a threat to revenue or a growth potential. According to “State of Green Business Report 2018” by GreenBiz, now companies and investors are shifting the gears. More and more of them start to believe that this view of ESG is mistaken— ESG performance is directly related to the well-being of a company and is a fundamental factor to business performance.

Companies that do good might be the best performers. Research finds that a company’s long-term prosperity is directly related to their ESG (BOA). It found out that the top 20 percent ESG rating company from 2005 to 2010experienced the lowest earning per share volatility (32 percent) in the following five years. On the contrary, companies with the most unfavorable environmental, social and governance had an average of 92 percent volatility.

Until now there are 42 national governments and 25 local governments are planning or have taken initiatives of carbon pricing actions (Greenbiz). Trucost, a company which makes estimates about hidden costs of unsustainable use of natural resources by businesses and part of S&P Dow Jones Indices assessed the expected influences of rising carbon prices by analyzing the greenhouse emissions and financial performance of approximately 100 companies in 16 countries. After an investigation, Trucost found that 30 percent of profits in the automobile industry could be at risk by 2050, the chemical industry could have 60 percent of profit at risk and power industry would have 150 percent of profits at risk (Trucost).

Keep in mind when you choose your investment portolio: Take a look at their ESG policy. Maybe you would like to follow the July trend in Irish and UK: Dump the stocks that do not align with the Paris Agreement or oil-related stocks.

To read more, please visit:
https://www.greenbiz.com/report/state-green-business-report-2018
https://bit.ly/2KXnxgN
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