Incorporating ESG and communicating risks to stakeholder enables build a resilient business that can tackle crisis with proper governance.
The business case for sustainable finance has materialized at an extremely crucial time when the costs of inaction have proved to be far more.
Ambition is the topmost layer focusing on robust governance for risk management and strategy planning with proper targets and metrices.
Action is the second layer which consists of detailed implementation roadmap related to:
- Developing ESG policy, internal capacity and conduct scenario mapping basis relevant stakeholders
- Materiality assessments
- Reporting and governance
- Developing ESG Dashboard
- Identification of ESG indicators and impact objectives/parameters
- Identifying ESG risks and opportunities in the areas/sectors that the fund would address
- Developing implementation strategy and key guidelines to be integrated into investment process and due diligence
Achievement is the bottom layer of the framework which emphasises on effective monitoring of ESG performance based on:
- Developing a decision making toolkit
- Assessing current state screening based on the ESG parameters/high level ESG risks
- Safety performance management
- Non-financial performance reporting advisory (across Integrated Reporting, TCFD, UN-PRI, UNEP-FI Principles of Responsible Investment)
- Assurance on non-financial performance parameters (such as GRI and IIRC)
- Periodic due diligence checks, outcome measurement and valuation
- Capitalize on risks and opportunities identified during acquisition process
- Monitoring to mitigate risks and optimize opportunities
- ESG benchmarking and market scan
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Summary
ESG-focused investing brings with it the advantage of greater access to investors who look at ESG as a strategic opportunity. It also allows investors to look at scenarios through the sustainability lens and make profits while creating a positive impact.