Oxana shared with us her expert view on Sustainable development and ESG-reporting:
The winds of change stirred the world of investments upon adaptation of the Sustainable Development Goals by the UN (UN SDGs) in 2015. The UN Paris Agreement, signed by world leaders in 2016, sped up the process. Covid-19 escalated the importance of environmental, social and governance (ESG) factors. Financial professional organizations such as ACCA call for collective action by business, finance professionals and society for social and environmental value creation. Without any doubt regulatory pressure will intensify the process and demand for sustainable business.
ESG funds have attracted record inflows during the coronavirus pandemic. Investors started looking not only for business profitability and high returns they became more interested in companies adopting environmental, social and governance practices. More and more investors want to invest in companies doing their business in accordance with the principle of sustainable development. To measure business sustainability investors study environmental, social and governance factors incorporated into the traditional financial analysis of a company. Each factor is measured and embedded into the final decision-making of investing into a company.
Russian financial market is no exception to the global trend. The global response to the threat of climate change is to lower use of carbon and encourage low-carbon and carbon neutral investments. Russian oil and gas companies are re-focusing on gas production as a greener fuel, replacing coal generators with gas power units, disposing assets with poor ESG parameters.
Investment decisions based on environmental and social aspects become more and more supported by sustainability ratings. For example, the World Wide Fund for Nature (WWF) have recently issued a report with sustainability ratings for Russian companies, which provide information for the global investment community on sustainability.
Without any doubt ESG has a great future and will change the world to make it a better place.
Natalya, please, tell us about your views on ESG reporting
ESG (ecological, social, and governance) issues became over the last 5-7 years even more important to business owners and investors than traditional financial performance. Data says, that over 30% of investors now consider ESG reporting and responsibility of a company when making their decisions, and the numbers of such investor type double every 2 years.
Companies need to find a balance between “doing well” and “doing good”, by embedding sustainability into their daily processes and products. There are already brilliant examples on the Russian financial and investing markets, where sustainable products exist, and companies create ESG strategies as part of their regular business strategies represented by Tinkoff, Sber as an example.
How would you define recent changes in reporting? What does this mean to companies?
Сonsciousness becomes a requirement for large companies, relationship between client and a company is no longer about merely buy a product and sell a product. Clients become loyal to a company when it is able to solve difficult cases called usually "moments of truth"
Large investments, which financial companies make into building a sustainable business will gain them loyal clients and change the way the company interacts with them. Leaders of the market understand that making social responsibility part of their strategy will change the company image and increase its value in the long run.