From greenwashing to value creation: The evolving role of ESG in finance


In a recent episode of the Fenergo FinTalks podcast, host Dhanum Nursigadoo and Lesley Li, founder and CEO of uIMPACT, embarked on a dive into the world of ESG.

Together, they tackled the pressing issues and discussions surrounding ESG’s potential in the finance sector.

Their discussion emphasised the significant impact the COVID-19 pandemic has had on global sustainability consciousness. With pressures from grassroots movements and governmental bodies alike, companies are in a race to advocate for a greener planet. The increasing awareness around climate change, diversity, and corporate ethics has prompted stakeholders to call for more transparency and accountability. Responding to this call, both companies and investors are leveraging ESG to not only showcase their commitment to sustainability but also to drive value and competitive advantage.

The conversation revealed that strong ESG practices have multifaceted benefits. They enhance a company’s reputation, making it easier to attract top talent, customers, and capital. Furthermore, by championing sustainable strategies, companies can realise cost savings and achieve an enhanced ROI. Additionally, ESG practices help in identifying and mitigating non-financial risks, thus avoiding potential lawsuits and reducing regulatory pressures.

The duo underscored that the responsibility of environment, social and governance doesn’t end at the company’s doorstep. It spreads across corporate leadership and the broader value chain. This holistic approach exemplifies that genuine commitment to ESG is a long-term game. To truly harness its potential, business leaders should prioritise and allocate necessary resources to ESG and sustainability, future-proofing their strategies.

Moreover, investors are actively scouting for companies with commendable ESG track records. The focus is to channel more capital towards assets and activities that resonate with environmental and social objectives. This shift highlights a clear correlation between sustainable business practices and financial performance. Fenergo, keen on supporting this movement, offers an ESG Readiness Assessment tool on its website. This tool helps companies evaluate their ESG scores and determine their overall ESG maturity.

Li shed light on the promising nature of standardised ESG data and disclosure requirements. While such initiatives might take time to create a tangible impact and influence capital shifts, they are undeniably a step in the right direction.

However, the spotlight on sustainability is a double-edged sword. It provides companies with an opportunity to genuinely advocate for sustainability but also leaves room for “greenwashing” – a tactic where companies falsely advertise their environmental efforts. Greenwashing can be perilous, risking significant reputational damage, loss of investor trust, and compromised profits.

Lastly, looking towards the future, the prominence of ESG in investing is poised to grow, especially as younger generations with a keen interest in ESG issues gain more financial leverage. Li and Nursigadoo both agreed that while ESG might currently be misunderstood by many, its transformation from a moral stance to a valuable business opportunity is evident. Companies must address challenges like greenwashing head-on to truly champion ESG in its entirety. As Lee wisely put it, “you win or you learn, you only fail when you stop trying”. Resilience will be the key for companies in their ESG journey.

Listen to the full episode here.

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