What Is Driving the ESG Market
What is driving the current ESG interest?
“Companies are currently experiencing pressures within their teams (including employees and shareholders) and externally (including customers, partners and the SEC) to demonstrate improvement on their ESG records,” said Toby Kraft, CEO & Founder, Teren. “For example, companies in the fossil fuel industry can demonstrate better commitment to ESG by ensuring their infrastructure is safe from climate-related physical threats. Or clean energy companies that develop solar sites can minimize stormwater impacts and construction costs by understanding and managing site-specific environmental conditions.”
How does a sound ESG strategy benefit business owners?
“With growing emphasis on ESG, investors will take the ESG performance of a company into account. ESG rating agencies assess companies ??on their ESG performance and make this data available to their clients. A low ESG score can be detrimental to the company’s public image. For public companies, this can cause stock to be considered an “unsustainable asset” by investors and excluded from their investment portfolio,” said Kraft. “Higher ESG metrics better prepare companies for future risks and opportunities. Many ESG metrics measure sustainability issues that are material to a firm’s short-, medium- and long-term financial performance and value creation. Even without shareholder pressure on ESG issues, a company with high ESG performance experiences less risk and more stable returns. Simply put, good ESG performance is good for business.”
How can business owners develop a strategy to address ESG and sustainability?
“For a company to develop an accurate strategy, we recommend that they leverage the increasing availability of climate scenario modelings to identify their broad exposure to different types of climate risks, such as heavy precipitation or wildfires. Once they understand their exposure to general climate risks, the company should then aim to understand how climate hazards may manifest locally and interact with site-specific conditions. Remotely sensed data and analytics should provide the spatial and temporal data needed to pinpoint, prioritize and monitor these hazards. Finally, companies can develop an effective strategy for mitigating climate hazard vulnerabilities through the targeted management of surface conditions,” said Kraft.
