According to the survey conducted by EY, institutional investors are ramping up their efforts in assessing their performance by using ESG framework. Majority of investors (98%) assess non-financial performance by conducting a structured methodical evaluation. The survey also identifies a growing disconnect between the increased focus on ESG performance and the availability of structured and standardized non—financial data from corporates. The percentage of respondents who say organizations are not adequately addressing ESG factors, has increased from 20% in 2018 to 34% in 2020 for environmental risk. The number has also increased from 21% to 41% and 16% to 42% in case of social and governance risk respectively.
A testimony to the fact was during the global recession the ESG funds performed better than the normal fund as ESG ensures long term business resilience . The pandemic has acted as an alarming call for businesses, highlighting the profound and direct impact of integrating ESG on economic stability. During COVID-19, various indicators such as good company governance, and high social standards have emerged as key indicators of resilience. Additionally, highly advanced digital infrastructure along with digital standards have emerged as a necessity to absorb the shock of a global pandemic. Therefore, it can be concluded that the COVID-19 situation has drawn parallels between ESG driven investments and long-term value creation.
Integrating ESG in Enterprise Risk Management will improve the consistency and cohesiveness of sustainability-related risk management. This integration will help in decision-making and resource allocation, minimize the financial impact and improve stakeholder confidence.