ESG finance poses risks but offers plenty of sustainable opportunities

May 5, 2021

Full story published in Energy Voice, May 5, 2021, by Ed Reed.

 

Excerpt:

Everyone you talk to agrees environmental, social, and governance (ESG) is critical to finance. Where people differ, though, is how best to achieve the goals this timely initialism sets out to capture.

A third of the world’s assets under investment have made ESG commitments under the Net Zero Asset Managers Initiative.

ESG sustainable financing

ESG’s forerunner was corporate social responsibility (CSR).

“There was a lack of maturity in the market, and a lack of readiness. Everything accelerated in 2020, marked by the Blackrock announcement in January 2020,” Workiva’s director of growth solutions Natalia Kaleta-Schraa, said.

Blackrock’s CEO Larry Fink letter declared a “fundamental reshaping of finance”. It highlighted concerns around climate change and disclosure – while also setting the scene for increased socially responsibility investment decisions.

Blackrock would be more likely to vote against boards where they fail to make “sustainability-related disclosures”, Fink said. “Disclosure should be a means to achieving a more sustainable and inclusive capitalism.”

ESG is not just about planting trees, Kaleta-Schraa said. “It’s a part of the core strategy aimed at having access to sustainable capital. It’s about producing less carbon but also about what are the company’s strengths, and where there is room to do better, what can be offset.”

Scrutiny

Workiva provides companies with the technology tools to make investment strategies and financial performance disclosures to regulatory bodies easier.

“We see a shift in the market,” said Kaleta-Schraa. “We’re helping customers put together sustainability disclosures. Early efforts had sometimes seen vanity projects or a genuine focus on providing data, but in ways that didn’t provide the required transparency.”

These efforts had tended to steer clear of metrics and were largely up to the discretion of the companies. “Investors are now looking with more scrutiny. That fits well with what we do and there’s a synergy with financial reporting.”

The question of disclosure has migrated upwards, Workiva’s senior director of product marketing Steve Soter said.

“If you’re going to raise capital, investors will want ESG metrics, it’s not just communications anymore. The CFO is participating – and companies need help with how to manage data and best practices. It’s a rapidly changing landscape.”

 

Read the full article on Energy Voice.

 

 

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