Finding the Value in Environmental, Social and Governance Performance
March, 05 2013
Environmental, social and governance (ESG) issues can be material, presenting risks across a company’s entire value chain from supply chain labor disputes to large scale industrial accidents and product safety concerns.
Reviews of the evidence on investor behavior confirms that ESG issues can result in fundamental shifts in a company’s financial well-being, management and culture. A growing class of risks, they can be financially material and increasingly a concern in today’s growth-challenged and volatile environment, where even small shocks from the outside world can determine whether a company sinks or swims. Those companies that are demonstrably prepared for ESG shocks can better mitigate the downside risks, both short- and long-term when they occur. This makes disclosure on how companies manage their ESG risks all the more critical, because it can help attract and retain investors and establish the long-term value of ESG management.
To learn more see reports
Finding Value in Environmental, Social and Governance Performance by Deloitt
and see GIVING VALUE TO EXTRA-FINANCIAL INFORMATION (english from p.5)
UNPRI Report: pioneer investors take into account the extra financial performance in their valuation methods
Investors need both investment returns and a society and environment in which to enjoy them.The analysis presented here attempts to deliver all three and sits at the cutting edge of investment practice in 2013. For the first time in the decade we have a document that shows unequivocally that integrated analysis can be done and is being done. It is being done by some of the world’s largest financial institutions and is being made widely available to institutional investors.
The extra-financial is included more and more into in the investment process. Meaning that the extra financial no longer penetrates only the analysis process, but also the decision making. This is a major change from the trend of “mainstreaming” pushed by the PRI . The case studies presented in this report reflect the rise of non-financial in five key processes.
The development of methods of financial analysis is an excellent signal for the extra financial criteria to break the “glass ceiling” in business investment. However, the road is still long. On extra-financials, most investors are still in a “rule of thumb rating companies” using rating agencies, without actually making a parallel with the true performance of the company. On the financial market side the analysis remains dominated by short-term and technical analysis at the expense of fundamental analysis.
The case studies presented in this Report Principles for Responsible Investment (UNPRI) show that non-financial reaches the heart of the investment business: the valuation of companies. The case studies in this report come from 17 investors and brokers pioneered the integration of extra-financial performance.