Future growth: ESG in the investment arena
The back-to-back disruptions of the coronavirus pandemic and the energy crisis have forced governments and businesses alike to rethink – and accelerate – growth strategies for the future. Resilience and sustainability have become priorities and there is a renewed commitment worldwide to mitigating climate change, enhancing energy security and, more generally, re-evaluating how we conduct business.
In both Greece and Europe, the transition to a green and digital economy is happening faster than anyone could have imagined five years ago. And for businesses, new environmental, social and governance (ESG) criteria are both a tool – and increasingly a requirement – for companies navigating this shifting environment.
Indeed, the European Union is at the forefront of this new era with its Corporate Sustainability Reporting Directive (CSRD), the first stage of which came into force in January. By next January, reporting requirements will be added for large companies and will be extended to small- and medium-sized enterprises by 2026. The challenge ahead is implementation: something that will require an earnest dialogue between policy makers and business leaders.
But ESG is not just an issue of mandatory compliance, it is also having an impact on investment. In July, Norway’s sovereign wealth fund – with $1.2 trillion in assets and a stake in more than 9,000 companies around the world – announced that it aims to have every company in its vast portfolio reach net-zero emissions by 2050. A recent study of Swedish real estate companies found that companies adhering to ESG standards can reduce their borrowing costs. And, here in Greece, a recent survey by EY showed that among foreign investors, 74% cited the country’s commitment to renewable energy and sustainable development as an incentive to invest.
Green energy is better for the planet, but also better for business, given the potential of green energy to enhance energy security. And minimizing a company’s carbon footprint translates into reduced operating costs over time. Social responsibility can focus companies on their local communities, bringing opportunities for near-sourcing and building more resilient supply chains. And studies have shown that good corporate governance, which can mean embracing greater transparency, diversity or better managing human resources, positions companies to be more profitable and enjoy higher equity valuations into the future. In short, ESG strategies are not just good policy, they are good business too.
But as the saying goes: the devil is in the details. The InvestGR Forum, now in its 6th year, is focused on bringing together business leaders and policy makers with the aim of developing concrete strategies for action. The rapid and accelerating adoption of ESG criteria by businesses, lawmakers and regulators is, and will be, a test case of translating policy into action for the collective good.
Because when governments, institutions and businesses join together, we really can make the world a better place. And because our future – the future of our planet, our businesses, and our communities – depend on it.
*The writer is CEO of Public Affairs & Networks, which organizes the annual InvestGR Forum. The 6th InvestGR Forum will take place in Athens on October 3-4, 2023.
