ESG! ESG Everywhere!
ESG! ESG Everywhere!
Environmental, social and corporate governance (ESG) is no new kid on the block – it’s been around since the 1960s. So why all the fuss now?
ESG metrics are non-financial indicators investors use to assess sustainability. As development actors and governments come to the realisation that they need the full buy-in of private sector actors, ESG is the new great corporate hope.
With more capital expected to come with ESG-strings attached, investors and operators are increasingly seeking to re-position themselves as ESG focused – or even, ‘Enhanced ESG focused’, as one contact recently put it.
Social media has, of course, played a prominent role in creating the kind of mass awareness and public sentiment investors can’t ignore. No one wants to be caught marginalising women, polluting the environment or profiting from the desperation of any stakeholder group.
In October, we saw two prominent voices get into it on the pages of the Wall Street Journal. Paul H. Tice, an NYU Stern professor accused the Principles for Responsible Investing (PRI) of forcing its agenda down the throats of corporate America.
Nathan Fabian, PRI’s Chief Responsible Investing Officer, having no doubt spilt his coffee, responded thus, “The widespread embrace of ESG investing isn’t the result of a hidden hand pulling the strings of the financial market. Investors increasingly recognize that ESG factors are material to their investments and that climate change exposes companies to risk…. ESG investing is a means to an end: sustainable returns.”
ESG investing in Africa is still at a relatively nascent stage, despite our several intimate entanglements with the concept – be it in the extractive sector; or during the anti-Apartheid protest divestments days.
We reached out to a few international stakeholders and found their responses interesting. All in all, the view seems to be that ESG investing opportunities are global; and developed market equities and other investment vehicles have plenty of data, credible and otherwise, for analysts to sink their teeth into. As such, they will likely focus on those types of developed opportunities in the near-term.
It is hard to assess the ESG credentials of privately held companies, unless they have proactively made the commitments and sizeable investments required to surface such data. With a few public listings on the horizon, one must wonder how African capital markets will fare?
What we do see is an increased focus on impact assessment, but once again – this is severely limited by various factors, including the lack of any coherent ESG strategy in the first place.
If you have recently asked your communication manager to do a better job at telling ‘our impact story’; then you’ve probably met with the astute response that it all starts with setting up and funding a coherent ESG strategy. We can help you with that.