Resources

Community Series #4: Know your ESGs

19 May 2019

Quest Ventures:    Download slides here  |  View video here
Panel Dialogue:    View video here

Quest Ventures hosted our 4th Community Series on ESGs (Environmental, Social and Governance) covering an introductory of ESG and how companies can apply them to make holistic decisions. The session was followed by a panel dialogue featuring Garden Impact, raiSE, and Asia P3 Hub, with Social Collider as a moderator, discussing what corporate giving means and the gaps in the sustainability space.

Here are three key insights from the session.

1. ESG: a decision-making framework

ESGs are, at their core, a holistic approach to making decisions. They have traditionally been used in investment portfolios where investors would exclude tobacco or vice-related companies. As companies saw the necessity of being a responsible citizen of society, so did investors in the way they chose and structured their investments.

Some examples of ESG factors that are used to evaluate companies are:

Environmental

Social

Governance

Climate Change
E.g: carbon emissions, product carbon footprint, vulnerabilities to climate change etc

Human Capital
E.g: labour management regulations and frameworks employed

Corporate Governance
E.g: diversity and inclusion within the board and workforce, providing fair and just wages

Natural Resources
E.g: Water, biodiversity, procurement of raw materials

Product Liability
E.g: Ensuring safety of the product, potential health risks

Pollution and Waste
E.g: Management of toxic waste materials, e-waste

Stakeholder Opposition
E.g: Sourcing of items in a socially ethical manner

Corporate Behaviour
E.g: transparency in policies, strong business ethics across all functions

Environmental Opportunities
E.g: Tapping on Clean technology, renewable energy

Social Opportunities
E.g: Provision of healthcare to workers

The interest in ESG has grown, though its applications vary. Some investors choose to look at ESGs as a negative screening, i.e. excluding certain companies upon consideration of the factors chosen. Others use ESGs to focus their selection and actively choose companies that are creating positive impact on various ESG factors.

Generally, organisations would be scored based on ESG factors, and the scores are compiled in a standardised scorecard that may be compared across time and between different organisations.

> Watch the recorded video on the spectrum of ESG investment here

2. Why should we all do it?

There are countless ESG scorecards in the market for businesses and investors to measure and benchmark themselves, such as the Bloomberg ESG database which has over 120 indicators and calculates a score for you based on the weighted average of the indicators selected. There are also industry-specific ESG indicators, percentile rankings, and scoreboards that are updated on a bi-weekly basis, ensuring that organisations are kept up to date on the latest and most relevant benchmarks.

During the panel dialogue, one panellist argued that “ultimately, a sustainable business is a profitable one […]. [The younger generation] want to see the intent and the practices behind your actions. Sustainability must be incorporated into your business model and your strategy.”

Another panellist concurred, “Social injustices are not the problem of governments, but the problem of businesses. We wouldn’t have social enterprises if businesses were being just. Let this not be just a hype or a talking point.”

Therefore, selecting relevant ESG factors and benchmarks to achieve would allow businesses to make a stand on what’s important, and sends a clear signal to stakeholders that the organisation is committed to doing good and being accountable for it.

> Watch the recorded video on Introduction to ESG here.

3. Making it relevant to you

It is common to hear organisations ask what are the biggest gaps or issues in society that they can address. One panellist summed up the answer, “The biggest gaps are the ones relevant to you.”

The “wicked” nature of societal problems means that it can be difficult or impossible to solve. What matters more in an organisational context is that organisations will need to decide for themselves what they want to focus on and how to do so. The problem that matters and the solution proposed will differ between organisations – and ESG scorecards are one way to narrow down what each organisation can commit to.

Of crucial importance is how much and what can your organisation commit to. The panelists reiterated that there are many forms of giving, including that come at no cost to companies, such as integrating giving into everyday work functions, sharing networks and contacts, and offering spare capacity. “Unless the enterprise is financially sustainable, they cannot contribute socially sustainable impact as well,” one panellist explains. Another explained it as portfolio management – you cannot overcommit to one but instead work towards a healthy balance of both purpose and profit.

To successfully assess the gaps in your organisational policies and select the ESGs important to you, Quest Ventures’ presentation suggests the Logical Framework Approach which is used to evaluate projects. Through defining your goal (the core problem you are solving), purpose (the outcome you are achieving to meet the goal), outputs (specific deliverables) and activities (what needs to be done to achieve the output).

> Watch the recorded Panel Dialogue video here