5 reasons to have a strong ESG policy for your business’s investments
The acronym ESG – environmental social governance – gets thrown around a lot in business circles today. But it means more than just a buzzword, and not taking it seriously could have consequences for your business.
That’s why in this post, we’ve compiled 5 good reasons to have a strong ESG policy for your business’s investments.
1. Your clients will appreciate your ESG policy
Your ESG policy isn’t just an internal policy that your business sticks to as part of its day-to-day operations – it’s also something that your clients will pay close attention to.
Your environmental social governance, ESG policies are frameworks in which your clients may have an interest. There are many reasons why this would be the case, but primarily it’s because of their own internal ESG policies, which may prohibit them from working with you unless your own policies meet their standards.
Not having a good ESG policy could end up acting as a barrier to business opportunities for many of your existing and future clients. Therefore, it’s important to assess the industry-wide standards for ESG before you put your own one together for your business.
2. There may be regulatory obligations around ESG
Most regulators now expect businesses to have a comprehensive ESG policy in place as part of their governance framework.
Not having these policies, or having poor-quality ones, could attract unwanted attention from the regulators, who have the power to issue financial penalties if they don’t think your governance framework is up to scratch.
3. ESG promotes a sound investment policy
It’s important not to treat ESG as just a buzzword that you use in your business communications, or as a tick-box exercise that you feel obliged to complete from time to time.
In fact, an ESG policy should be considered part of the risk profile of your investment strategy. Failing to pay attention to the environmental, social, and governance implications of your investments could mean that the companies you invest in fall foul of industry expectations, or worse, are affected by environmental and social issues, causing the value of those investments to fall in the long term.
4. ESG may be an important recruitment device
When students graduate from university, they open themselves up to a wide range of graduate employment opportunities. But today’s young people are more ethically conscientious than ever, and when they enter the jobs market they’ll be looking out for potential employers whose values align with their own.
Therefore, to avoid missing out on recruiting some of the top talent, it’s important that your business can showcase the values and standards it adopts as part of its business model, so it can retain valuable employees who help drive the business forward.
5. ESG is ethically important
Last but not least, there are strong ethical grounds for having a solid environmental, social, and governance policy.
If your business’s actions end up causing environmental or social damage, that’s something that neither you, your employees, nor your customers will be happy about. You should try to avoid those damaging consequences both for the sake of your own moral concerns, as well as for the longevity of your business.
Final thoughts
In conclusion, there are plenty of valuable considerations to take into account about your business’s environmental, social, and governance policy.
Don’t consider the formulation of the policy a tick-box exercise, but rather a strategy to deliver long-term success for your business.
Put together a thorough, comprehensive policy that achieves long-term investment growth and satisfies the expectations of your customers, clients, employees, and the regulator.
