AC4985 Week 6 ESG

Pros of ESG practices for investors and companies

Potential cons of ESG practices

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Governance

Social

Environmental

3 Pillars of ESG

• Energy usage and efficiency
• Climate change strategy
• Waste reduction
• Biodiversity loss
• Greenhouse gas emissions
• Carbon footprint reduction
• Air and water pollution
• Natural resource depletion

• Company leadership and management
• Ethical business practices
• Avoiding conflicts of interest
• Accounting integrity and transparency
• Board composition, including its diversity and structure
• Executive compensation policies
• Regulatory compliance and risk management initiatives

• Rules on corruption, bribery, conflicts of interest, and political donations and lobbying
• Whistleblower programs

• Diversity, equity and inclusion (DEI) programs
• Employee experience and engagement
• Data protection and privacy policies
• Fair treatment of customers and suppliers
• Customer satisfaction levels
• Funding of projects or institutions that help poor and underserved communities

• Fair pay for employees, including a living wage
• Equal employment opportunity
• Employee benefits
• Workplace health and safety
• Community relations, including the organization's connection to and impact on the local communities in which it operates
• Responsible supply chain partnerships
• Support for human rights and labor standards

• Energy usage and efficiency
• Climate change strategy
• Waste reduction
• Biodiversity loss
• Greenhouse gas emissions
• Carbon footprint reduction
• Air and water pollution
• Natural resource depletion

• Diversity, equity and inclusion (DEI) programs
• Employee experience and engagement
• Data protection and privacy policies
• Fair treatment of customers and suppliers
• Customer satisfaction levels
• Funding of projects or institutions that help poor and underserved communities

• Fair pay for employees, including a living wage
• Equal employment opportunity
• Employee benefits
• Workplace health and safety
• Community relations, including the organization's connection to and impact on the local communities in which it operates
• Responsible supply chain partnerships
• Support for human rights and labor standards

• Rules on corruption, bribery, conflicts of interest, and political donations and lobbying
• Whistleblower programs

• Company leadership and management
• Ethical business practices
• Avoiding conflicts of interest
• Accounting integrity and transparency
• Board composition, including its diversity and structure
• Executive compensation policies
• Regulatory compliance and risk management initiatives

Threats

Contextualize your topic

• Plan the structure of your communication.
• Give it a hierarchy and give visual weight to the main point.
• Add secondary messages with interactivity.
• Establish a flow through the content.
• Measure results.

Opportunities

Contextualize your topic

• Plan the structure of your communication.
• Give it a hierarchy and give visual weight to the main point.
• Add secondary messages with interactivity.
• Establish a flow through the content.
• Measure results.

• Investment returns and sustainability can mix. Sustainability funds can achieve similar or better returns compared to traditional funds.
• ESG can attract new customers for additional growth.
• ESG investing pushes companies to make other positive investment decisions. Organizations with ESG initiatives tend to focus on a wide range of environmental issues and ethical practices.
• ESG helps companies attract and retain high-quality employees. It can boost employee motivation and increase overall productivity by giving workers a sense of purpose.
• ESG can cut costs. When ESG practices are incorporated into the fabric of an organization, operating expenses, energy bills and other costs can be reduced over time.

• ESG doesn't follow a one-size-fits-all approach. The approach to ESG that works for one company might not work for another, which complicates both management of ESG initiatives and ESG investing. The need to weave ESG efforts into both day-to-day business practices and long-term strategies adds more complications.
• ESG strategies that aren't authentic can backfire. For example, a company that engages in greenwashing -- a term for making false or misleading claims about environmental actions -- could face a customer backlash that affects revenue and the value of its stock.

• Strong stock market performance isn't guaranteed. While there are success stories, focusing on ESG doesn't guarantee strong performance by a company's stock.
• Creating a diverse investment portfolio can be difficult. For investors focused on an ESG-led investment strategy, it might be harder to create a balanced portfolio that aligns with long-term goals.
• Detailed performance reporting across different ESG criteria can be challenging. Most ESG factors aren't tied directly to financial data, resulting in additional effort to provide tangible performance results.