ESG is the future of successful corporate doings – it’s not just Australia, but the world is embracing the concept with open arms, and we should react fast!
Remember when protests broke out in the US following George Floyd's death in 2020. The Black Lives Matter Movement brought thousands to the street. Company after company tried to show their support on social media. They blacked out Instagram and condemned police brutality and racial injustice. Consumers and activists soon called them out with their own social media campaigns.
Some companies announced big initiatives with big price tags. The Bank of America announced a $1 billion plan to assist communities of colour impacted by the pandemic. Cisco donated $5 million to many organisations fighting racism. Glossier pledged a $1 million donation to black-owned beauty businesses and organisations. Nike committed $40 million to the black community.
Companies were being singled out from employment and investment attraction-and-retention based on corporate responsibility – either for a lack of it or for a commitment to progressive ideals.
ESG is a trend that began to accelerate well before the demonstrations and pandemics, it's just now gone mainstream. Now, it's something investors, clients, consumers, employees, and prospective candidates assess before forging new corporate relations. These stakeholders are now looking at real-time corporate behaviour as it plays out in front of us. This all falls under what's known as ESG investing, a catch-all term for socially responsible business practices.
A lot of terms come up when we think of ESG investing and it can get confusing, so we are going to let real-life examples define it for you.
ESG boils down as reflections that are part of the panoply of considerations that investors consider when buying and selling securities. At a corporate level, ESG essentially reflects the company's attempts to integrate environmental and social issues into the way they do business. Business establishments are required to redefine their business model and strategies to attract new investment and talent pools.
ESG investing means taking into consideration how a company's ESG credentials will affect its financial performance. Usually, investors and prospective candidates use these credentials to determine whether it is right to invest or forge new relations with a company.
ESG investing will not be something carved out of the investment panoply. Investors and the talented workforce are now armed with these new tools, and data sets that help them to make more informed investment decisions, or professional development choices.