ESG investing continues to drive corporate responsibility and positive impact on society and the environment

Changes come in a diverse number of ways, and ESG investing is one of those methods to align an investment with personal beliefs. ESG is a decade old way of investing that focuses on the social impact and the governance structures that influence investments. FSG creates sustainability in the markets.

ESG investing has grown to become an imperative part of finance in the last decade, when players in the sector started assigning ESG scores and other reports on investments. A recent UN meeting also observed how dominant the focus on ESG has grown in recent years. The E, S and G measures are the critical factors driving the investment domain. Green bonds have emerged over the years, index funds and mutual funds that follow the ESG measures. A poor score in either environment, governance and social responsibility, means that a party has failed in their social or cultural beliefs to drive changes in society.

Corporate social responsibility and ESG

CSR and ESG are two different factors geared towards driving change in society. ESG focuses on the external factors, which when fine-tuned can have a lasting effect on society. On the other hand, CSR is an internal component. CSR is a business process that helps create a positive image of a company in society.

CSR is an internal component regulated internally whose main role is to impact the image of the company. ESG is an outside factor that investors use to gauge the role the company is playing in fostering change in society.

Nike

Investments are done with a sole purpose of making profits, and some investors will not mind the negative impact of a company’s activity to the outside world when they have their profits. However, in the wake of climate change and other sensitive issues touching modern society, big players in the investment domain have aligned their profit-making desires to other social issues that a company stands for. For example, fossil fuel companies have switched their activities to become more sustainable. The change comes from government pressure, and the woke society that wants a better future for coming generations.

Nike is an example of a corporate that takes ESG seriously, with an annual report touching on the same alongside the financial results. The social impact of Nike is profound in society, with a focus on children development. Via its SDGs, Nike has built its brand around children, and is pushing for the development of sports in different communities worldwide. Beyond children, Nike has pushed its employees to maintain an active lifestyle, which in a way helps promote a healthier society. Factoring what Nike is doing while using ESG, the company is advancing a social aspect focused on creating a healthier society.

Impact of ESG

Having a positive impact is one goal for many companies to drive their sales through a better image. Investors also show responsibility to society, which has become sensitive to what individuals do with their money. Piling pressure on investors makes ESG work. In addition, modern challenges such as climate change are issues that are driving investors to measure the positive impact a company has on society before buying shares or injecting their money.

While the focus on ESG is changing society, doing so takes a toll on individual companies on a larger scale that are trying to change the world.

Starting the list is the lack of a standardised approach to check on the positive impact of an investment to society. The challenge creates a possibility of falsifying data to satisfy the society. The frenzy towards FSG has piled pressure on small organisations to shift their primary focus and follow the big companies in setting sustainable goals, which impacts their working capital.

Which way forward

ESG provides a modern way to pressure companies into gearing their services towards positivity. It helps when climate change is a major challenge in society. While setting standards for ESG remains a challenge, companies should continue to embrace the issue to help transform society.