One of the signs that a nation is fully developed and with a stable economy is the presence of many infrastructures. But as the world is slowly shifting to a more environmentally conscious way of living, more and more investors are looking at building green assets.
This is the basis for what is known as ESG infrastructure, which is a practice for investors to screen the compliance of infrastructures projects to ESG factors, or the environmental, social, and governance factors. The best ESG practices can offer companies a competitive advantage, and understanding it will put your business ahead of the competition.
What is ESG and What is its Effect on Your Business?
ESG factors are environmental, social, and governance factors that socially conscious fund managers consider when investing in projects. Sustainable investing used to be just a small niche in the world of investments and was taken on only by investors who wanted to align their portfolios with their values.
But these days, with a growing awareness of the impact of infrastructure growth on the environment, a company’s corporate and investment performance are not the only factors being considered by fund managers before investing but its ESG performance. So, your company should improve its ESG practices to gain a competitive edge and attract more investors.
When building projects, your company should look into improving how you address various environmental issues, such as setting goals to reduce greenhouse gas emissions, incorporating the use of renewable energy, and reducing possible exposure to toxic chemicals in your operations. If you develop strategic plans that address climate change issues and reduce climate footprints, there is a higher chance for your company to be noticed by fund managers and get more investments.
Social factors look at how your company manages its relationships with your employees and the community it belongs to. Some of the more pressing issues of today’s time include gender equality, human rights policies, and racial diversity in the workplace.
Finally, governance factors are also assessed to avoid internal conflicts and create transparency in leadership. These factors include transparency in political contributions and other spendings, race and gender diversity in the board, and responsible data disclosure. If your company can address these issues, you will be avoiding issues concerning corruption and the company’s leadership.
How Your Company Benefits from Strong ESG Practices
Investors Love ESG
Investors favour companies that incorporate ESG infrastructure and business practices into their strategic planning because it shows their prospective value. In addition, because of the stricter implementation of ESG policies, more companies who have implemented ESG best practices and sustainability into their dealings are receiving more financial grants, which shows in their investment returns reports.
Consumers Love ESG
With many people shifting towards a more eco-friendly lifestyle, their spending habits have also shifted towards supporting companies and businesses that support more sustainable practices, after all, who wouldn’t feel good about supporting companies that can be considered stewards of the environment.
Better Operational Performance
With ESG best practices in place, the performance of all your departments will improve and be much more cohesive. In addition, with its employees receiving fair and equal treatment, there will be a better work environment, leading to increased productivity and eventually growth in your company as a whole.
The Bottom Line
Implementation of ESG best practices in your company’s infrastructure benefits not only your company as a whole but its many components under your care; the environment, your people, and your community. This is why you must include these practices in your company’s long-term strategic planning.