How ESG Issues Influence Risk Management
Environmental, social, and governance (ESG) criteria help others evaluate specific companies’ ethical status and investment sustainability. These factors are an increasing interest to business, investors, and other stakeholders — not to mention society, in general.
Naturally, as people’s priorities change, so do customer demands and expectations. These dynamics have created a more spotlighted corporate social responsibility (CSR) for many companies. This post explores how ESG issues unfold in our culture and how companies can respond to this societal shift appropriately, managing risk along the way.
Many individuals interchange the terms ESG and CSR, and they’re not too far off. As mentioned, these terms surround sustainability, another hugely broad concept. Nevertheless, in this sense, sustainability refers to investing responsibly in socially conscious companies while pursuing financial return and environmental good simultaneously.
Many factors contribute to this overarching concept, although there is no universal or standard definition of ESG or what ESG factors are. The events of 2020 are excellent examples of how much our attitudes, attention, and explanation of ESG issues have changed, not to mention why human capital management is essential. Despite the lack of a consistent standard, here are three primary ESG factors:
Keep in mind that ESG factors are ever-changing, shifting alongside ethic-related issues. For example, the COVID-19 pandemic and police brutality brought unprecedented attention to social justice issues, including disparities in the following:
Unfortunately, ESG issues have no reliable, consistent, and comparable analysis, mainly due to the lack of regulation. Even so, shareholders, institutional investors, and asset managers are increasingly integrating ESG into their overall investment strategies, pushing companies to make more public ESG disclosures.
But there is no single global standard or framework for ESG related disclosures. These are complex issues, and many are industry-specific. And because ESG disclosures are primarily voluntary, much information from companies in the same space isn’t standardized or even reconcilable from each other.
The following are key developments that unfolded in 2021, helping to change the ESG landscape:
We each witness how various ESG issues surface in the modern world. Unsurprisingly, ESG issues have plenty of legal implications, including:
Likewise, there are mounting demands for higher quality and universal disclosure on ESG performance indicators. In 2022, we expect more directives and regulatory actions on this topic, such as the SEC’s climate disclosure proposal. As a result, it’s critical for executives to protect their company from new risks as the world around them changes.
Understanding the details of what coverage your company needs can be a confusing process. Founder Shield specializes in knowing the risks your industry faces to make sure you have adequate protection. Feel free to reach out to us, and we’ll walk you through the process of finding the right policy for you.
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