Last Updated on Thursday, 9 December, 2021 at 10:39 am by Andre Camilleri
Lina Klesper, Legal assistant at PKF Malta
Staff from PKF attended the fifth Annual Private Wealth Switzerland Zurich Forum, which offered exclusive access to the leading minds throughout the private wealth investment industry. The forum provided numerous international attendees with the latest information and insight on the future of fixed income, equities, private debt, infrastructure, technology, allocation plans and real assets investing.
The flavour of the sessions was set to be the Crypto market and all futuristic topics revolving around blockchain. However, it comes as no surprise that the hot topic was ESG, which drew much attention and gathered as many questions from the attendees. While some had to Google what ESG stands for –Environmental, Social and Governance – others were no stranger to these non-financial factors nowadays commonly used by investors as part of their risk analysis process to identify material risks and growth in asset acquisitions. The ESG discussion has evolved rapidly, as are techniques for incorporating analytics and factors into the portfolio construction process. Despite the disruption caused by Covid-19, ESG filter continues to be a powerful tool and metric for developing investment strategies in many European countries.
In today’s time, where sustainability and social responsibility are almost becoming common terms of our daily life, ESG and CSR are becoming a hot and frequently non-avoidable topic in the business world. While Corporate Social Responsibility (CSR) is holding businesses accountable for their social commitments in a qualitative (cultural) manner, be it of environmental, philanthropic, ethical, or economic nature, ESG helps measure or quantify such social efforts.
There are multiple reasons why CSR and ESG (should) matter to businesses beyond their branding and marketing purposes. While it is surely appealing to customers when a company plants trees, raises awareness for cancer and donates for charitable causes in the process of creating a friendly social image to stand out among competitors, the real benefit of CSR for a company lies within developing a strong company culture, which further empowers employees to do social good and in turn creates an inclusive welcoming environment. The business will most likely benefit from reduced work-related health problems in the workforce and boost employee retention, morale and productivity.
Aiming for proper and actionable ESG criteria just makes sense. Not just for the obvious benefit for the environment and people but also for the company’s own success. Keeping track of one’s ESG is reassuring to partners and investors who are interested in the long run since it illustrates the company’s risks and opportunities as well as its ethics. A predilection for ESG can be highly beneficial for external partners and investors for making strategic decisions. In that way, it is easy to identify areas where the business is wasting resources, has potential for optimisation and forecast how likely it is that the company will be successful in the long run. Having more sustainable practices comes hand-in-hand with the ESG criteria and vice versa. Such a breed succeeds in the long run as opposed to those enterprises opting to making short-term gains. The former gives signals of organisational strength and long-term vision attracting risk-wary partners and investors.
The obvious reason in favour of ESG probably still has to be pointed out and cannot be stressed enough. For a company to be socially and environmentally responsible, with ESG it makes financial sense. Having a healthy and motivated workforce boosts productivity and good quality work and creates a welcoming and open-minded working environment. This attracts top talent. Being appealing to customers makes a company competitive, placing it in a slot for sustained growth and development. Furthermore, economies can be reaped by reducing waste and optimizing resource allocation. All above benefits of CSR and ESG are highlighting the importance of social considerations, which all lead to the same conclusion: It makes business sense to be environmentally and socially responsible.
ESG is certainly no stranger and is not just to be valued by investors and managers. In September the Malta Institute of Accountants hosted the Biennial Conference with a focus on ESG and accountancy. There it could be seen that also accountancy and auditing professionals are eyeing opportunities in new sustainability accounting requirements.
With increasing demands for sustainable reporting and holding companies accountable to society at large, accountants and auditors are well-placed to guide decision-makers on reporting sustainability issues. A new European Commission framework will standardise non-financial reporting for a section of the private sector seeking to achieve comparability and consistency in assurance reports on sustainability. Under the Corporate Sustainability Reporting Directive companies will have to disclose information on their actions and impacts on social and environmental issues. PKF will encourage readers to start an awareness campaign in their corporate and social entities to empower their ESG and CSR responsibilities.