WHAT IS ALL THE BUZZ AROUND ESG…?
Environmental, Social, and Governance (ESG) is a framework for companies and investors to evaluate the overall impact on the environment and society, as well as the transparency of corporate governance. In some circles, ESG has become an emotionally charged phrase. What are some of the pros and cons of ESG…?
CONTINUATION OF WHAT IS ALL THE BUZZ AROUND ESG…?
ESG’s influence on reporting corporate emissions According to a McKinsey study, 90% of S&P 500 companies now publish ESG reports. In fact, the SEC is considering new rules which would stipulate that all publicly traded companies include their climate-related risks and greenhouse-gas (GHG) emissions. That is, companies would be forced to report total emissions and spillover effects, which would make it more difficult for companies to hide behind their numbers. This consideration aligns well with the recently adopted Federal Building Performance Standards and Building Performance Colorado.
Shifting Demographics By 2025, millennials will represent ¾ of the workforce and they have been dubbed the values-driven generation. One of their motivators is to make the planet better; hence, they are more likely to invest and do business with green and socially responsible companies. Furthermore, as millennials and women grow in numbers in the labor market and in assets, they will be able to wield even more ESG influence.
Controversies Is ESG pushing the envelope too far…? That has yet to be determined. There is criticism around greenwashing, marketing a company’s sustainability, and the murkiness around measuring a company’s ESG. Some companies that have been wrapped up in ESG and profit scandals are Volkswagen, Nikola and Theranos. Volkswagen’s 2015 Diesel-Gate scandal, Nikola’s CEO touting their EV truck progress in 2020, Theranos wild claims in 2016 about the success of their blood-tests. Moreover, there still is not a universal tool to measure a company’s ESG, which can make it tricky discerning a company’s actual ESG vs. their greenwashing.
Positive Outcomes Wherever you stand on climate change, it is hard to deny that emitting less pollutants into the environment is better for our society and planet. Sure, this comes at a cost, but let us not go there. What researchers have proven: there is a correlation between companies that adhere to ESG standards tend to have happier and healthier teams; greater productivity and profitability; greater retention and return on investment (buildings). Bringing it back to Colorado’s ESG office space, many ESG reports provide accurate data, which can help companies and investors make informed decisions. Tenants are now weighing in on whether a building is comfortable and efficient. Some of the savvier tenants, are even asking the tough questions: what are property managers and operators long-term energy plans, and what are they doing to reduce GHG emissions and waste?
Better and greener Colorado’s latest building energy initiatives such as Building Performance Colorado and Energize Denver tie into ESG. Is Denver’s goal to be nearly carbon-neutral by 2040 attainable? How much of a role will electrification play…? All the investments and interest in ESG is exciting-I hope we continue to bet on the right solutions to make Colorado better and greener.