Corporate Environmental, Social, and Governance or ESG is no longer a new concept. What started as criteria for investors looking to impact the environment and society positively has grown to be a key discussion in the business world. What has now become a movement is encouraging more and more companies to commit to sustainability.
That said, there is still doubt about the future of corporate ESG. The main concern is, is this just a fad that will be phased out with time? Will companies really commit to the cause long-term, or are they in it for the potential short-term profits?
What really is the future of corporate ESG? The simple answer is ESG is here to stay and will likely be more ingrained in corporate culture in the coming years. Here’s why:
The Demand for ESG Investments is Steadily Growing
ESG investing has continued to gain momentum and is expected to grow as more investors realize the impact their money has on environmental and social sustainability.
By the end of 2022, global ESG fund assets had risen to approximately $2.5 trillion, up from $2.24 trillion at the end of the year’s third quarter. This growth was nearly two times that of the global fund market.
With more investors, individuals, and institutions continuing to direct their investment dollars to sustainable assets, companies have no option but to prioritize sustainability.
Technological Innovation is Transforming Information Access
The demand for ESG investments has been further driven by technology. For instance, the internet has completely changed how we access information. Now, investors have access to abundant data to inform their investment decisions. And thanks to advancements in AI, analyzing this data is a lot easier.
These developments have forced companies to be more ethical and transparent in their practices. As data becomes more available to people, companies will continue to adopt sustainability to attract investors.
Governments Are Getting Involved, Encouraging Companies to Embrace ESG
It is not just investors driving the shift toward better ESG practices. Customers and, more importantly, governments are starting to play active roles in the movement. In the case of customers, they are considering aspects like environmental conservation, inclusivity, and good governance when buying from brands.
As for governments, we are starting to see the enactment of policies and regulations that support the ESG course. All these efforts are cumulatively pushing for companies to consider ESG a long-term shift.
ESG is Here to Stay & May Determine Future Business Survival
ESG is no longer a small movement centered around a small group of investors. Today, the concept is quickly expanding, with more stakeholders pushing for corporate sustainability on all three fronts. The pressure from all these corners will only make the movements grow, and companies that will not adjust their strategy to include ESG will likely struggle to survive in the future.
So, it is safe to say without a doubt that the future of business is deeply intertwined with ESG.
