First of all, ESG is the acronym for Environmental, Social, and (Corporate) Governance.
The ‘Rethinking ESG in a post COVID-19 world’ publication has identifies the 5 keys for sustainability and how businesses can get ready to meet the sustainability challenges ahead.
The 5 key drivers to the growth of ESG:
- Investor expectations – Environmental and social factors are having a greater influence over a company’s future performance and valuation. Returns on socially responsible investment indices are outperforming their conventional index counterparts.
- Sustainability reporting – Global investors are now calling for mandatory inclusion of climate risk disclosures in financial accounts for use by companies, banks, and investors in providing information to stakeholders. Bank Negara Malaysia (BNM) and Securities Commission Malaysia are also pushing for the adoption of reporting standards as recommended by the Task Force on Climate-related Financial Disclosures (TCFD) among local financial institutions.
- Regulations – There has been an increasing need to address scrutiny and adverse public reaction over environmental and social concerns in several sectors, especially when they are subject to more stringent foreign regulations.
- Fiscal policies – Incentives to promote responsible business conducts to be sustainable. The Budget 2021 introduced Malaysia’s first sustainable bond, as well as the extension of the successful Green Technology Financing Scheme (GTFS) to encourage the private sector to participate in green technology.
- Customer behaviour – PwC’s Global Consumer Insights Survey 2020 research revealed a clear embrace of sustainability and a sense of civic duty. 52% of our respondents in Southeast Asia say they expect businesses to be accountable for their environmental impact. 52% of them also say they would avoid the use of plastic whenever possible.
Source: CFA Institute