Making meaningful business change through ESG
In a world of numbers and high-powered deals, it’s easy to neglect the human side of business. To thrive, we need to do more than talk. At Investec, they do more than interact — they make it their business to understand yours... That’s business made human.
The Working Lunch with Arabile Gumede is a series of intimate conversations that bring experts around a table to engage and interrogate the importance of the humans on the other side of business transactions.
With the world's focus on climate change, businesses have also come to the realisation that in order to navigate a changing world, it needs to invest in and priorities the global efforts made to reduce our greenhouse gas emissions.
Environmental, social and corporate governance (ESG) has become a buzzword, and is now a focus in the world of business, as industries look to become and remain successful.
When it comes to the social side of things, business has made a move to focus on ensuring employees are happy in their jobs, which in turn will foster a healthy working environment, and will help with he future success of the business.
What does it mean to have an ESG perspective in business?
It is in the best interest of business to take ESG seriously to ensure companies think beyond the bottom line.
A business in today’s world where the environment as well as the well-being of employees matters, it is of utmost importance to ensure this practice forms part of a business' everyday culture.
"It defines a set of non financial parameters that we apply to the analyses of companies. Companies these days have a fiduciary duty to all stakeholders, not just their shareholders. That means the environment around them, the communities they interact with and how they manage that or govern that. When we at Investec or evaluate companies for investment purposes or lending purposes, we don't just look at the sales, the profits and the cash-flow momentum or healthy the balance sheet is, we also consider what they do for the society at large," says Campbell Parry: Global Resource analyst at Investec Wealth and Investment.
Can the ESG space be regulated?
From a regulatory perspective it isn’t a one stop shop. It differs from business to business, and what might be important to one, could not be so for the other.
This then means regulations will have to adapt to what businesses or the sector feels is important to them.
Can the ESG then be regulated, according to the specifications of each stakeholder?
A regulatory frame work will provide clarity, particularly given the fact that there are global objectives in place, like employee wellness and environmental awareness initiatives, which business are working towards.
Just like business, ESG is multifaceted and that needs to be taken in to consideration.
Business should be given the space to be agile and adaptable to the ever changing needs of their employees, business partners, investors as well as expectations of society at large.
“Where ESG is a bit intimidating because there are so many principals and frameworks. The tail starts wagging the dog because you don’t even want to start, there is so much in reporting obligation that you spending all your time reporting and you not spending the time managing the company & efficiencies, and identifying the opportunities. There is the discussions around coming together and finding a common framework, a common goal, a common regulation and that happening at the moment. It has been a bit unfortunate because I think it has, because of the intimidation factor that people have not wanted to start”, says Hazel Banach from Investec’s business lending division.
Is Net Zero a realistic possibility?
In South Africa, the mining sector has made great strides in reducing its greenhouse gas emissions and being more environmentally aware.
Parry is there's been a shift towards being more environmental conscious over the last decade.
“There is net zero on the horizon as well, so they all starting to align themselves with Paris, they all reporting along of the lines of TCFD (Task Force on Climate-Related disclosure) at the moment and they are making short and long term climate emissions targets, they all doing a better job with water which is a direct result of climate energy consumption efficiencies they’re improving. So they have different targets they maybe got shorter dates, some are longer dates but they do realise there is a difference to be had,” says Parry.
Does that mean we'll be able to reach our short and long term goals of reducing all man-made greenhouse gas emissions from the atmosphere through reduction measures?
To put it bluntly, we're a long way off from reaching those targets, due to a multitude of factors, which include issues related to geo-politics says Parry.
“There's politics getting in the way. The US political regime is notoriously fickle and it can change every four years. Three years from now, we may find a new US political regime in place, then all those climate and environmental agendas are off the table. China, to move east is another issue, because they got some very ambitious plans with renewable energies and the like, but they are also doing a lot with coal.” added Parry.
Listen to the full conversation below!
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