The COVID-19 pandemic has highlighted the urgent need to address climate change as part of environmental, social and corporate governance (ESG) issues of companies and businesses.
In a poll Verdict has conducted to assess which among the three ESG factors is most important as ranked by companies, a majority 45% voted environmental factors to be the most important, while 37% voted corporate governance and 18% voted social factors to be the most important.
Social factors was the second most important, according to 56% of the respondents, followed by corporate governance (23%) and environmental factors (21%).
Corporate governance was accorded the third rank by 40% of the respondents, followed by environmental factors (34%) and social factors (26%).
The analysis is based on 241 responses received from the readers of Verdict between 01 February and 12 April 2021.
Significance of ESG factors
The three ESG factors are usually interlinked, and equally drive sustainable performance of a company or business although at varying degrees. Investors are employing these non-monetary factors in their search for potential growth opportunities and material risks.
Each of the ESG factors have different material effect on a business or sector. Environmental factors, for example, are more important for the renewables sector, but not as important for the services sector.
Environmental issues have currently garnered much attention amid the coronavirus pandemic from a political and economic viewpoint. Climate change, global warming, and carbon emissions are quantifiable and can be easily reported by a company although social and governance factors are equally important to attract investors.