With sustainable investing high on the international agenda, there is increasing pressure on companies to make sure they have an appropriate strategy in place.
BlackRock – the world’s largest wealth manager and pioneer in sustainable investing – was charged last week with inconsistencies in its ESG agenda. ESG stands for environmental, social and corporate governance and refers to a series of standards that measure the performance of a company in areas such as CO2 emissions and social responsibility.
The investment firm was found to have ties to an Indonesian palm oil company, raising concerns again about possible blind spots in the ESG investment process. However, according to Singapore-based consultancy Asia Research and Engagement (ARE), companies can take several steps to ensure their ESG strategy is considered and consistent.
It’s not good to have a commitment for 2050 and expect all changes to happen in 2049.
Benjamin McCarron
Founder and CEO of Asia Research and Engagement
First, companies need to express a strong intention to “manage everything that needs to be managed,” Benjamin McCarron, ARE founder and CEO, told CNBC on Tuesday. These can be internal guidelines or external investments.
Then executives should set up a timed plan to achieve these goals.
“It’s not good to have a commitment for 2050 and expect all changes to happen in 2049, so there has to be a plan that is in place and that is progressive over time,” he said.
An Acehnian worker harvests oil palm fruits on an oil palm plantation in Kuta Makmur, North Aceh Regency.
SOPA pictures | LightRocket | Getty Images
Next, they need to implement a transparent reporting system and have adequate governance in place to ensure reporting is followed.
After all, businesses must start now. “Don’t be too late,” said McCarron.
The advice comes from the fact that interest in ESG investing has increased. In the first quarter of 2021, investments in sustainable funds hit a new high of nearly $ 2 trillion, according to Morningstar, marking the fourth quarter of earnings.
However, investors should continue to exercise caution to ensure that companies act according to their claims. Institutional investors should enter into a dialogue, exercise their voting rights and implement proposals from shareholders to ensure that companies achieve the goals set.
Meanwhile. It’s a lot easier for retail investors, McCarron said, “You can have any value you want. If you don’t want to own something, you don’t own it.”