Is ESG losing steam?

Is ESG being pushed over to maintain profits? Are compliances being watered down for short-term gains? Though it is too early to conclude, indicators point in that direction.

Governments and corporates are finding it difficult to answer a blunt question: What and where is the impact of your ESG strategies?

Global compliance and regulatory mandates have made it possible for the stakeholders to report on the Environment and the Governance components. Where is the social component?

Our irresponsible behavior, utter disregard for the environment, and apathy toward the problems of fellow beings are leaving the planet in a quandary.

The impact is equally horrifying: unprecedented floods and heatwaves, melting glaciers, poverty, hunger, and displaced lives.

Global organizations led by the UN, the World Bank, the Asian Development Bank, and countries united on a common platform (Paris Agreement) to retain the temperature to 1.5-to-2 degrees C (pre-industrial period). UN SDGs, climate action, carbon capture and removal, renewable energy, and Net Zero are the new fashionable buzzwords. Or are they?

I am inspired by the daily reportage of ESG events, and governmental, NGO, and global initiatives to combat climate change. But I am also a bit confused with the on-the-ground signals.

For example, the number of naysayers or anti-ESG brigade is on the rise. Led by the West which is soft-landing ESG theories, the turnover has slowly percolated into Asia upward/downward.

Two things are tweaking the ESG story. One: Greenwashing and two: data and financial risk/security—the crux of any business SMB, MSME, large or multi-national. While data security has always been challenging for organizations, the new viruses stump the businesses worldwide. What is equally important to understand is: that data security laws, frameworks, and regulatory compliances are far more granular. They cover the end-to-end data security policies and practices including the human angle. Lack of compliance also has a far-reaching impact.

The ESG sector has yet to see that kind of whole-hearted and collective acceptance: across the sectors, across countries, across organizations, and end customers. Country-wise, each nation has its own set of regulatory compliances for ESG. Are they enough? For instance, one just has to look at the BRSR forms—they account for just box ticking. Or the recent EU Green Bond Standards which mandate EuGB holders to ensure 85% of the bond’s raised funds are used for taxonomy-compliant economic activities until the taxonomy framework is fully operational. The balance of 15% can be allocated to other economic activities as long as they clearly explain its
allocation.

Secondly, the impact of ESG needs to be properly documented. Instead of being a part of an exclusive club for the elite, who are busy voicing opinions on domestic and global platforms, the influencers must unite and play a proactive role. The need of the hour, according to me is to develop a strong community and bring ESG into the mainstream. Convey the impact in a manner that everyone can relate to. The narrative does not always have to be scary. If we are reporting about the deluge, let us also highlight the positives that effective ESG, sustainability, climate action strategies, and implementation can affect.

It is time, ESG is dusted off the silos and integrated into the mainstream. While arguments for and against continue, I want the voices, even constructive critics to be vocal about the change they want.

Meanwhile, here are some statistics to chew on:

The global ESG market is expected to quadruple from $7.7 billion in 2020 to $31.2 billion by 2030. Asia is expected to drive growth with ESG AUM expected to surpass $500B by 2025. Not to be left behind, India’s ESG market is predicted to constitute 34% of its domestic AUM by 2051, aligning with its goal of net-zero emissions.

ESG is real. ESG can be effective. It needs a collective effort…