As part of a trend for lasting change, investors and consumers alike are becoming far more vocal about organisations putting Environmental, Social and Governance (ESG) criteria at the heart of their missions, writes Thom Wilkinson, a Partner at solicitors Bishop & Sewell, specialising in Property and Environmental Law.
In the wake of the global climate crisis and ongoing Covid-19 pandemic it feels as if the world is on the brink of pivotal change where the future must offer more than a return to normal.
A recent PwC survey revealed 67% of UK consumers consider ESG important. Similarly, research by BlackRock found investors plan to double sustainable investments over the next five years.
Lawyers are increasingly being consulted on both planning and governance issues, in particular.
What is ESG? If you have heard of it, you’ll probably associate it with environmental issues such as climate change and carbon emissions. And yes, this is part of it. Organisations produce ESG reports to document their environmental impacts and assess sustainability.
But ESG also encompasses an organisation’s governance and social practices. It promotes ethical behaviours, diverse leadership, employee wellbeing and seeks transparency for stakeholders. One of its biggest drivers are global targets for net zero carbon emissions by 2050. All organisations are expected to contribute, from large corporations and metropolitan authorities, to tiny start-ups. ESG also fits well with the #MeToo and Black Lives Matter agenda of fairness and equality.
Investors are taking it increasingly seriously, with MSCI (a leading provider of investment decision-making tools) reporting that businesses with robust ESG criteria experience lower cost of capital and are less exposed to risks than low ESG scoring companies. Simply put, investors want to invest in companies that adhere to ESG standards. Take Aviva Investors for example, who said they would not invest in Deliveroo due to the lack of basic rights for workers.
Despite progress, there is still a way to go. We recently learnt that since the 2015 Paris Agreement on the environment, the world’s 60 largest banks provided $3.8tn of fossil fuel funding. That said, the rise in ESG means organisations are under pressure to act ethically and transparently, with investors rejecting companies that do not meet ESG standards.
As ever, if you would like to discuss any of the points raised in this article, please do get in contact. Thom Wilkinson is a Partner specialising in Property and Environmental Law and is contactable on Tel: +44 (0)20 4513 6073 or Email: [email protected]
About Bishop & Sewell LLP
Bishop & Sewell is a long-established, full service Central London law firm – with an international reach – specialising in Personal, Property and Commercial legal matters. To learn more, visit www.bishopandsewell.co.uk