Environmental, Social, and Governance (ESG) investing is rapidly gaining popularity as investors seek to align their investments with their personal values and support companies that prioritize sustainability and good corporate governance. So let’s explore why ESG investing matters for corporate sustainability and profitability, and how entity management software can help companies stay on top of ESG issues.
What is ESG Investing?
ESG investing is an approach to investment that takes into account a company's environmental, social, and governance performance, in addition to traditional financial metrics.
ESG investors seek to support companies that prioritize
- Ethical behavior
- Good corporate governance
The aim of ESG investing is to create long-term value for both investors and society as a whole.
Why Does ESG Matter for Corporate Sustainability?
Corporate sustainability is the practice of managing a company's environmental, social, and governance risks and opportunities in a way that creates long-term value for all stakeholders, including shareholders, employees, customers, and communities. By considering ESG issues in their business strategy, companies can create a more sustainable and resilient business model that is better equipped to address the challenges of the future.
Examples of this in action could include:
- A company that prioritizes environmental sustainability might invest in renewable energy or reduce its carbon footprint to mitigate the risks of climate change.
- A company that values social sustainability might prioritize employee well-being, diversity and inclusion, or ethical sourcing practices.
- Companies that prioritize good governance might have a strong board of directors, transparent reporting, and effective risk management practices in place.
All of these actions could strengthen a company’s core values and create value for investors who prioritize ESG.
How Does ESG Affect Profitability?
Contrary to popular belief, prioritizing ESG does not necessarily come at the expense of financial performance. In fact, numerous studies have shown that companies that prioritize sustainability and good corporate governance tend to outperform their peers over the long-term.
- A 2015 study by Harvard Business School found that companies with strong ESG performance had a lower cost of capital and higher profitability than those with weak ESG performance.
- A 2020 report by Morgan Stanley found that sustainable funds outperformed their non-sustainable peers during the COVID-19 pandemic. This is likely due to the fact that companies with strong ESG performance are better equipped to weather crises and adapt to changing market conditions.
How Can Entity Management Software Help with ESG?
Entity management software, such as Athennian, can help companies stay on top of ESG issues by providing a centralized platform for managing their subsidiaries and legal entities. By using entity management software, companies can track their ESG performance and monitor their compliance with relevant regulations and standards.
Athennian's compliance management features can help companies track their compliance with environmental regulations, such as emissions reporting, or social regulations, such as labor standards. The software's document management features can also help companies track their progress towards sustainability goals, such as reducing carbon emissions or increasing renewable energy usage.
In addition, entity management software can help companies improve their corporate governance by providing transparency and accountability. The software's task management and collaboration features can help ensure that everyone in the organization is aware of their responsibilities and deadlines, reducing the risk of errors or delays.
Athennian Can Help You Become More Attractive to Investors
ESG investing is no longer a niche concept, but a growing trend that reflects a broader shift towards sustainability and ethical investing. Companies that prioritize ESG issues are better positioned to create long-term value for all stakeholders, and entity management software can help them stay on top of their ESG performance and compliance obligations. By using entity management software, companies can enhance their corporate governance, improve their sustainability performance, and ultimately create a more resilient and prosperous business model for the future.
Entity management software, such as Athennian, can help companies stay on top of their ESG issues by providing a centralized platform for managing their subsidiaries and legal entities, tracking compliance with relevant regulations and standards, and improving their corporate governance. Contact us today to schedule a custom consultation for your entity management software needs.