Environmental, Social and Governance (ESG)

The ESG Story

ESG (Environmental Social and Governance) ratings for companies are the talk of the boardroom and ESG considerations are becoming a critical metric in corporate decision-making: 83% of C-Suite executives and investment professionals believe that ESG programs will generate more shareholder value in five years than they do today.

(source: McKinsey Global Survey)

Despite entering the mainstream, ESG reporting remains a challenging process, because of data availability, quality and reliability, making it difficult for organisations to meet the needs of all stakeholders. With the growing importance of ESG, it can pay for businesses to understand what ESG is and in particular how improving their climate credentials can influence their ranking.

Definition of ESG Ratings
ESG factors cover a broad spectrum of issues. The ratings measure a business’s resilience in regards to environmental and societal challenges and how robust and transparent its governance is regarding the company leadership, internal controls, and shareholder rights.

Importantly, ESG is about a company’s exposure to ESG-related risks, not necessarily about a company’s sustainability performance.

The term was first conceived in a 2005 UN Report titled “Who Cares Wins: Connecting Financial Markets to a Changing World” to urge financial institutions, regulators, and investors to play a larger role in tackling climate change and incentivise organisations to implement environmentally, socially, and economically sustainable practices.

It was not until 2013 that ESG entered the mainstream after various studies illustrated the link between sustainability performance and financial success. According to research by Refinitiv, companies with high ESG scores tend to have higher market value. While J.P. Morgan states that “During 2020, there was growing evidence of positive correlations between ESG and financial performance”.

Embracing the climate transition to improve ESG
ESG is not only good for our planet and communities, but it is then also a driver of strong financial results. And with climate being such an important part of the E of ESG it stands to reason then that companies should strive to improve their climate performance. and ultimately become more sustainable.

With this in mind, we have built the 51 to Carbon Zero platform to enable companies to deliver net zero at speed and improve ESG rankings.