Why organisations should be investing in ESG strategy
Why organisations should be investing in ESG strategy?
The benefits that are accrued out of investing in ESG strategy are real. Any business that looking to improve its performance and increase its attractiveness to the customers and investors should make ESG a priority.
In the recent past, it was universally understood and accepted that the main objective of investment was the maximisation of returns for the shareholders – everything else including social and environmental aspects came second.
With the threat to climate change and subsequent rise in responsible investment movement, the environmental, social, and governance (ESG) strategy is now used in the screening of investment and assessment of the attractiveness of any business.
For any business, ESG ought to be a journey and not a destination. If we take the market as a race, where profit denotes our speed, ESG in this case will be how we conduct ourselves in this race. To impress the socially conscious investors we need to maintain a good ESG rating. This will be achieved by our conduct and how we operate our businesses and to a large extent the amount of money we are making.
Benefits of ESG to your business.
Pursuing a high ESG performance is beneficial to a business. First, a company will be more attractive to investors. With the focus being on green investment, socially responsible investors are much interested in funding projects which have good ESG scores. A cloud provider that has installed a liquid immersion cooling system, for example, will not struggle to get funds for investment. The use of liquid immersion cooling in its data centre is already considered a green initiative which leads to a higher ESG score.
Studies have shown that businesses which have higher ESG scores are highly likely to perform better than their competitors. This is an indication that good ESG leads to better performance. The fact that a business is considerate of the welfare of all stakeholders means that they treat all with the respect and dignity that is required. As a result, customers will prefer patronising their business and using the products on offer.
Recent surveys reveal that long-term ESG actions provide a business with high adaptability where the evolving models lead to the minimisation of the impact that disruption from regulations or even new technologies may bring. Such a business will already be well prepared for regulation meaning that they will not be heavily impacted. For businesses with a low ESG score, the introduction of new regulations such as a requirement to reduce greenhouse gas emissions can negatively impact the business. In some cases, these businesses take along to adapt, sometimes leading to their closure.
Climate change is a real threat, the recent Intergovernmental Panel on Climate Change (IPCC) report paints a grim picture where a business-as-usual option spells destruction for the planet and its inhabitants. Luckily, we can reverse all that, first by adopting the ESG and aiming at a high performance. For data centres, adopting a cooling system that reduces carbon emission, lowers energy consumption, and improves the performance of the workers can be a good starting point, ultimately aiming at meeting all the green investment requirements. This is achievable – one step at a time, but with the urgency it requires.