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Is the financial and capital market actually putting the right value onto sustainable business matters? And how relevant are ESG ratings for companies?
ESG ratings help investors assess a company’s sustainability and ethical performance, and so it feels rather crucial for businesses to put the necessary value and importance onto such scores.
Similarly, it feels imperative that companies make all efforts necessary to continue improving and climbing up the ESG rating ladder.
However, this is not always the mindset of many companies and sustainability directors; understandably, they have many things to tackle, as corporate sustainability is a highly complex issue, but we are here to prove that ESG ratings actually matter.
The financial impact of ESG factors
One of the biggest questions and debates surrounding sustainability and ESG today is whether we should start understanding and measuring such matters as we do with financial concerns.
And the answer seems to be a radical yes; because, in fact, social, environmental and governance matters have a much greater impact on finances than what many organizations suspect. The problem is no one was measuring such an impact adequately.
Make employees an active part of the sustainability strategy
Questions such as the vulnerability of a company towards climate change, or the overall satisfaction of employees are some of the ESG matters that can have great financial impact but did not tend to be considered as relevant, or at all.
Capital markets and regulatory institutions seem to be putting their minds and resources to actually change this reality, making ESG ratings take the central stage.
The importance of ESG ratings
Now that it is fairly clear for investors how environmental, social and governance factor impact the financial performance of companies, they are increasingly turning their heads towards ESG criteria in order to assess companies’ sustainability.
This criteria helps investors and other financial actors understand that which traditional financial analysis does not reveal, capture or even measure.
This of course has made ESG portfolios advance and develop in a very fast pace throughout the last few years. Some companies are even outperforming in their sustainability portfolios in contrast with traditional financial ones.
This being the current situation, it is only natural that ESG ratings matter more and more, as investors need and objective assessment and evaluation of companies’ sustainable and ethical performance.
ESG ratings are in fact designed to help investors (as well as clients) identify and understand material environmental, social and governance risks to a business. And so companies find themselves in need of such an evaluation, and a rather positive one.
How can companies acheive better ESG ratings faster?
First thing’s first, it is crucial to set measurable and tangible ESG and sustainability goals for the company both short and long term, and develop a roadmap of actions and initiatives that can be taken to achieve such goals.
In DoGood, we aim to simplify the complex web of sustainability objectives for companies by offering a platform that translates the high-level ESG (Environmental, Social, Governance) objectives into actionable tasks for every single employee.
Then, each employee not only knows how to make an impact but also feels empowered to contribute meaningfully to the greater sustainable strategy.
No more vague directives. No confusion. DoGood automates the process, making it seamless for the workforce to know precisely what steps to take.