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ESG
Environmental, Social & Governance

OVER VIEW

Environmental, social, and governance (ESG) criteria are used to evaluate your company and potential and current investments. Environmental criteria consider a company’s effects on the environment and its ability to mitigate various risks that could harm the environment. Social criteria examine how the company handles its relationships with employees, suppliers, customers, and the communities where it operates. Governance deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights. Today, ESG criteria are used by the largest investors and managers in the world, including banks, sovereign wealth funds, pension funds, asset managers, private funds, and regulators around the world. Knowing how to identify, measure, and report on these issues and concerns will position your company for opportunity and growth. 

ENVIRONMENTAL

Environmental concerns range from climate change, carbon trading, and emissions (and related disclosures) to floods, wildfires, and desertification. Anything in the natural world that could impact a company can be considered under these analyses. Recent examples include VW’s emissions scandal that cost the company more than 7 Billion USD in fines to multiple governments, and cost several C-suite executives their jobs; the PG&E bankruptcy in the US after a particularly bad wildfire season in California in 2019; and new climate-change reporting and disclosures obligations coming into effect via California state legislation, EU legislation, and the voluntary adoption of the Task Force on Climate-related Financial Disclosures recommendations and PRI climate risk strategy and governance indicators by many large companies and asset managers.

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SOCIAL

Social considerations include how a company acts towards its own employees and managers, towards its local community, and towards the global community. They include hourly wages and health insurance benefits to how women and minorities are treated in the workplace, to remuneration (pay) practices, to supply chain issues, to corporate citizenship. Consider the Weinstein Company’s precipitous collapse and bankruptcy, and subsequent purchase by a private equity firm at a fraction of its previous value (with no part of the sales price going to equity owners), after many women, including employees and clients, accused Harvey Weinstein of sexual harassment, rape, and violence. Or how companies are responding to the Covid-19 pandemic in terms of furloughing employees, providing extended health insurance benefits, etc. 

Governance

Governance includes ideas around the makeup and remuneration of leadership, effective oversight and financial management, and risk identification and management. These are issues that underpin companies’ strong financial returns around the world and extend to companies’ supply chains. When problems arise in this arena, they are generally not small: think Enron’s bust or Ericsson’s 1 Billion USD in bribery sanctions. Governance also includes how a company and its managers are reporting or disclosing risks, including environmental and social risks. Regulators around the world are paying close attention. In the US, the SEC is investigating companies’ ESG claims and urging investors and companies to provide and use “decision-useful” information. In the UK, the FCA is requiring companies to report on climate-related risks and requiring managers to integrate ESG criteria into their portfolio selection and management.
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WHY US?

We have years of experience working with investors, asset managers, and companies. We understand the complexities of working with multiple stakeholders, including board members, portfolio companies, analysts, executives, and regulators. Our backgrounds in engineering, entrepreneurship, business, and law mean that we can break down complex concepts, help you understand the different values and how to best respond and position your company, and develop sound and executable strategies.