Finance Monthly April 2019 Edition

There is no doubt that a focus on Environmental Social Governance (ESG) by funds brings financial gain, so why is it that some financial institutions and leading companies are still lagging so far behind, asks Emma Arnold from WYG. Even last month at the world’s largest property event, MIPIM, leading investors stated that they would only focus on environmental matters if it was driven by client needs. This is frustrating given this year’s global risk report states that the top four global risks in terms of likelihood or impact magnitude are environmental – extreme weather events, failure of climate change mitigation, adaptation and natural disasters and water crisis. There are therefore clear and tangible financial risks for those leaders lagging behind in the safeguarding of their companies and funds for the future. ith mounting media coverage on environmental issues, there has never before been so much pressure on CEOs and financial leaders to step up and become real drivers for change. With current geopolitical instability and government divergence on regulation, there seems to be never-ending uncertainty in how high on government agendas sustainability really is. Without finance, projects do not happen and companies do not function, and therefore our financial and corporate leaders have far more power to bring about real cross-boundary global change than regulators. It makes sense because pollution and social harm cost money, both in tangible loss of profit and in reputation. For example, much focus has been placed on energy and oil and gas companies in recent years regarding their inputs to climate change, but there is a wider focus now across all businesses; just look at the recent focus on fast fashion (waste, viscose pollution, bleaching chemicals, slave labour) and agricultural land use (deforestation by beef, soy, wood and palm oil). The increase in, use of, and availability of technology throughout the world enable widespread communication, leading to a real and increasing global social drive for change in the way we live - from the food we eat to the brands we buy. A banking friend recently said to me: “We cannot take the role of the police”, and I agree, but financial institutions can outline guidance in sale purchase and funding ESG - A DRIVER FOR GLOBAL CHANGE AND SUSTAINABLE FINANCIAL GAIN Emma Arnold, Technical Director - Environmental Due Diligence at WYG W 40 www.finance-monthly.com ASK THE EXPERT - ESG