According to a recent Wall Street Journal article, assets in funds that claim to focus on ESG factors reached $2.78 trillion in the first quarter, up from less than $1 trillion two years earlier. However, investors lack a consistent and transparent view of what qualifies as an Environmental, Social, and Corporate Governance investment. This lack of transparency has prompted the SEC to issue new rules governing what qualifies as an ESG fund.
Here is a quick guide to what a company with an ESG initiative should do to ensure that they continue to attract capital from a growing pool of "ESG" money:
1. Prioritize investment in ESG initiatives that can be measured and those that promote transparency (e.g., carbon footprint reduction);
2. Invest in a Digital ESG platform that tracks the impact of ESG initiatives. For example, a leading consumer products company built an ESG platform that tracked their carbon footprint reduction from a solar panel installation initiative by integrating with internal and external systems;
3. Leverage the digital ESG platform to share the impact of ESG initiatives publicly and transparently. Build trust in reporting by allowing an external audit of the ESG platform.
What are your experiences in the area of ESG tracking and reporting?