ESG has come of age
By Tom Parker
Deputy CEO (EMEA)
SEC Newgate S.p.A
Not so long ago, some saw ESG as a fad, something that would cease to be front and centre as soon as we had a big crisis or recession. Some even argued that ESG ran contrary to the fiduciary duty of directors (to maximise value and returns for shareholders).
That is no longer the case. Today, we are slowly emerging from the biggest, global public health emergency we have ever seen, in which more than 4.5 million people have tragically lost their lives and the global economy is estimated to have been impacted by upwards of $4 trillion in lost economic output. When it comes to rocks in the road they don’t get bigger than Covid 19.
Yet despite this huge crisis, ESG remains the big corporate issue. It’s the lever that activists pull to force a change in corporate strategy, it’s the measure that investors look for and it’s the area of maximum corporate debate in public and political spheres.
Today around $100 trillion of global finance is managed in funds with an ESG focus and in three days’ time we see the start of the COP26 UN Climate Change Conference which will lead to renewed focus on the role of corporates in driving progress towards a greener, fairer, more equitable world. Progress measured by ESG.
For this and many other reasons SEC Newgate has today launched its inaugural ESG Monitor, a global survey of more than 10,000 consumers in ten countries which charts consumer views of ESG, and the behaviour of corporates and governments in respect to environmental, social and governance metrics.
The findings make stark reading.
It is perhaps no surprise to hear that ESG is a global concern for consumers with six in ten people (61%) surveyed across 10 countries saying they are very interested in ESG as an issue.
When you drill-down into this, the environment is the issue that people are concerned about the most with more than half (52%) saying they are highly focused on it.
What is perhaps more surprising (and worrying for corporates) is that consumers are not willing to allow business to take its time and manage a solution, they expect action now and they’re very willing to become activist if they don’t see the progress they expect.
More than half of all those we surveyed in the ten countries say their perceptions of a company’s ESG performance had an influence on their purchasing decisions with a further 32% of those surveyed saying they had warned others against using a company due to ESG concerns.
In addition, more than a quarter (26%) had discussed a company’s behaviour online or on social media.
It is worth reiterating again that this comes in the midst of one of the greatest public health and economic crises that the world has seen. ESG continues to be a critical issue despite (or perhaps because of) the storms ranging around us.
The survey also reveals a lack of trust in corporates to deliver impact through ESG, with 74% of those surveyed globally believing there should be a consistent approach to reporting ESG and 71% believing companies’ ESG claims should be regulated, with the same proportion believing firms should be penalized for poor ESG practices.
Equally concerning is that more than half of all global respondents (52%) believe that companies are over reporting the positive environmental impact that they deliver.
Yet despite this, only one in five people are willing to pay more for goods and services if they knew the provider was doing the right thing in terms of ESG issues, suggesting that consumers expect business to behave ethically and not to charge a premium for doing so
We are just days away from COP26, a climate change conference that US climate tsar John Kerry has described as ‘the last best chance the world has to come together in order to do the things we need to do to avoid the worst consequences of the climate crisis’. Yet for the corporate world the focus should also be on what happens after COP26.
At that point, the baton passes from the diplomats to business, regional politicians and society at large to deliver the carbon reductions, the aid and the sustainable development that is needed to get us to net zero.
The SEC Newgate ESG Monitor shows that consumers will be watching closely, and they don’t expect the corporate or political world to fall down on the job.
The SEC Newgate Global ESG Monitor is a groundbreaking research project across 10 countries that examines how environment, social and governance issues are influencing perceptions of business and governments.
TO DOWNLOAD THE ESG MONITOR REPORTS