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The acceleration of investment in ESG portfolios has been matched only by the proliferation of third-party ESG content and the speed of its dissemination. However, the measurement of ESG remains in its infancy and is currently hindered by measurement which is voluntary, partial and opaque, making it hard to understand the materiality of ESG risks and opportunities. Here we unpack the alva view on what it is, how to measure it and how it can be leveraged as a strategic asset.
The numbers across all stakeholders are compelling. Whether it be the trillions of dollars now invested in ESG indices, consumer stated purchasing preferences or graduate choice of employer, ESG matters. For businesses, the challenge is to understand and then enhance their ESG perception among these and other important groups. This is now the key factor in long-term, sustainable growth.
In a market where investors are demanding insight into companies’ sustainability credentials, ESG ratings can provide a means of measurement. But with a lack of consistency, opaque methodology and restricted source material, there isn’t a standout solution.
For businesses, there is a fine balance to be struck between establishing the genuine, long-term nature of their ESG stances through valuing virtue over convenience and the actual alienation of the customer stakeholder group.
The post-pandemic world will see an ever-greater focus on environmental, social, and governance issues. Business leaders need to be aware of how ESG risks can affect their company, and register stakeholders’ priorities in this area.
ESG criteria have risen to the top of the list for investors and other stakeholder groups alike, but is it possible for an organisation to reliably quantify its ESG performance?
As ESG criteria become increasingly important denominators among the investment community, specific metrics for measuring ESG performance are coming to the fore. But with such a broad range of issues falling under the ESG remit, investors should be considering a wider set of metrics, many of which are much harder to quantify.