Is your Environmental and Social Governance ready for investor scrutiny?

The recent case of the Australian National University (ANU) divesting shares of seven companies based on their environmental and social governance performance has sent a clear signal that investment decisions are now very much influenced by more than share performance.

Debate has raged about the rigour and integrity behind ANU’s research and subsequent decision making and the politics of making the change in investments so public. However, the fact remains, investors choose where they invest whether companies, media or politicians like it or not.

Environmental and social governance should be firmly on the agenda for boards and the risks it encompasses assessed, addressed and monitored.

Reputational Risk

The public declaration regarding the companies divested demonstrates how damaging of reputation it can be if investors, or indeed any stakeholders perceive them to be below expected environmental and social governance performance. A demonstrated commitment to environmental and social governance can strengthen brand value and improve employee attraction and retention.

Financial Risk

Increasingly investors have expectations regarding environmental and social governance performance of companies. If they are not happy with what they find, they simply won’t invest. Is your company ready for that scrutiny? Are you able to make that information available?

Risk Management

Stakeholder engagement and collaboration throughout planning and service delivery serve to manage and where possible mitigate risks. Starting with identification and mapping of stakeholders and continuing with engagement and collaboration in an ongoing capacity.

Cost Savings

Finally, by reducing environmental impacts and improving business processes and supply chains a company can also drive efficiencies and achieve cost savings.

As the ANU case shows, the tide is turning regarding environmental and social governance and stakeholder expectations. The responsibility lies with companies to take responsibility for their own environmental and social governance and ensure information is readily available and results are clearly reported.

 

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2016-10-21T11:15:33+00:00 October 29th, 2014|

About the Author:

Jason is an Executive Director and founding owner of corporate advisory practice Blue Zoo with extensive experience in Governance, Strategy and Risk.