ESG : The Future of Investing
“Socially Responsible Investing or SRI” is an investment concept based on the belief that investments can be a powerful tool for promoting positive change and advancing the common good, and that investors have a role to play in shaping the behavior of companies and the economy as a whole. This can involve investing in companies that have strong ESG (Environmental, Social, and Governance) practices, avoiding investments in companies that engage in harmful activities, and using shareholder engagement and advocacy to encourage companies to improve their ESG performance. As SRI gained popularity, ESG became mainstream for corporations and companies.
Here are some examples of how companies implement ESG strategies:
Environmental: Implementing sustainable practices and reducing the company's carbon footprint, such as using renewable energy or reducing waste.
Social: Ensuring fair labor practices and promoting diversity and inclusion within the workplace.
Governance: Establishing strong governance structures that promote transparency, accountability, and ethical behavior.
ESG is important for a variety of stakeholders, including investors, companies, employees, customers, and society as a whole.
Investors should care about ESG because companies with strong ESG practices have been shown to outperform their peers over the long term. Additionally, investors may have ethical or moral reasons for investing in companies that align with their values and have a positive impact on the environment and society.
Companies should care about ESG because it can help them reduce risk, improve their reputation, and attract and retain customers, employees, and investors. By implementing strong ESG practices, companies can demonstrate their commitment to sustainability, ethics, and responsible business practices, which can lead to increased loyalty and trust from stakeholders.
In Thailand, many companies have taken ESG as the way forward for sustainability. An example is Lotus’s, which has recently announced their 2030 vision which includes zero waste and SME support.
Employees should care about ESG because it can affect their work environment, job security, and career opportunities. Companies that prioritize ESG may offer a more attractive workplace culture, better benefits, and opportunities for professional development.
Customers should care about ESG because it can influence their purchasing decisions. Consumers are increasingly aware of the impact their choices have on the environment and society, and they may be more likely to support companies that prioritize sustainability, ethics, and social responsibility.
Here are a few examples of what ESG Investing has taught us
- The 2011 Fukushima disaster in Japan was caused by a massive earthquake and tsunami that struck the country, leading to a catastrophic failure of the Fukushima Daiichi nuclear power plant. The disaster had significant environmental and social consequences, including the release of radioactive material into the environment and the displacement of thousands of people from their homes. In response to the disaster, the Japanese government implemented a number of measures to improve the safety and oversight of the nuclear industry, and many Japanese companies implemented measures to improve their ESG practices, including investing in renewable energy and improving their risk management and disclosure practices. The disaster also had a significant impact on investor attitudes toward SRI and ESG factors in Asia, with many investors recognizing the importance of considering environmental and social factors in their investment decision-making.
- The Cambridge Analytica incident involved the unauthorized harvesting of millions of Facebook users' data by a political consulting firm called Cambridge Analytica. The data was allegedly used to influence voters during the 2016 US presidential election. The incident had significant social and governance implications and highlighted the need for greater transparency and accountability around data privacy and corporate governance. It also emphasized the importance of companies considering the social and ethical implications of their actions, as well as the potential risks associated with their supply chain and business partners.
Finally, society as a whole should care about ESG because it can have a significant impact on the environment, social justice, and economic stability. Companies that prioritize ESG can help address environmental and social challenges, and promote long-term economic growth and stability.
