The term ESG first came into the limelight in 2004 after the UN published a report called “Who Cares Wins.” Since then, ESG has seen a significant paradigm shift to become a critical topic for investors, businesses, and policymakers globally.
More companies and investments are much more attuned to the importance of ESG investing. This can be attributed to laws put in place and the fact that the younger generation has increasingly become concerned about the climate. Besides, some investors feel obligated to support companies with good environmental and social policies.
But before discussing the trends expected to be on the rise for the rest of 2023, let’s look at ESG’s triple-bottom benefits for a better understanding.
ESG’s Triple Bottom Benefits
A good ESG strategy benefits the environment, society, and governance. Here is how:
- Environmental benefits: Environmental concerns have become a critical global problem. ESG practices can bring dual benefits that reduce a company’s operational costs while addressing environmental issues.
Apple, for instance, has committed to using 100% renewable energy. This commitment has seen the company save over $80 million a year while conserving the environment.
- Social benefits: Apart from caring about the communities, many investors also invest in companies dealing with issues close to the investor’s hearts. For example, if you have a company focused on improving access to clean water in poor communities, you are likely to attract investors committed to the exact cause.
- Governance benefits: A good governance structure is critical in ESG investing. Investors seek a robust corporate structure before investing their money in companies. Through good governance, businesses can make good returns to their investors due to sound company leadership.
ESG Trends Expected to be on The Rise in 2023 And Beyond
Now that you have an idea of what ESG is, here are the ESG trends to watch out for in 2023:
1. 5G Sustainability and Positive Impact on The Climate
According to 2020 research by Ericsson, a Swedish mobile phone maker, 1.4% of global emissions come from the telecommunications industry. Shockingly, newly conducted research from BCG indicates that telecommunications companies account for twice as much carbon emissions as the civil aviation industry.
As a result, the telecommunications industry has kick-started various initiatives to help reduce its carbon footprint, with 5G being among the top priorities.
It is believed that 5G is intrinsically sustainable by design. It is set to positively impact sustainability across all economic and human activity, including carbon-intensive industries. And since 5G is 100x faster than 4G, it will be able to bring about the full potential of Internet-of-Things (IoT).
There are tons of 5G and IOT-enabled solutions that benefit climate change because 5G can support more devices than ever before. For instance, it can impact the transportation sector positively by introducing self-driving cars. Besides, it can allow more people to work and access entertainment from home, reducing car and plane emissions.
2. ESG Litigations are Poised to Continue Rising in 2023 and Beyond
According to the US Securities and Exchange Commission (SEC), businesses in the United States and the European Union must report on their carbon emissions and reduction progress alongside their financial reports. This opened doors for consumer-oriented lawsuits on the sustainability of their products, and the trend is expected to be on the rise in 2023.
Some of the areas expected to receive much attention in ESG litigations include greenwashing, disclosures, and proxy issues. And since prioritizing ESG is not an option for businesses anymore, they must rise to the challenge of collecting enough data and the ability to validate their data. This can be hard to achieve, which is why the industry needs to be practical with the available data to enable sustainable investment decisions.
3. A Strong Push for Holistic Approach to Net Zero in the Manufacturing Sector
More forces are expected to continue pushing sustainability to the top of the agenda and the plan to net-zero emissions in 2023 and beyond. As such, the overall economy will put ESG policies in place and work together towards a holistic approach to net-zero carbon emissions.
Case in point, electronic and manufacturing companies are some of the major contributors to climate change due to emissions. They also pollute the soil due to landfilling. Such companies are expected to continue working together to reduce their waste.
This can be achieved by applying eco-friendly design principles alongside thorough documentation and regulation around reliability, such as recycling core components into re-manufacturing processes.
The best part is that apart from reducing the carbon footprint, this strategy can expand the global second-hand market.
ESG strategies have been a significant consideration for many companies because more investors are looking to invest in businesses with efficient ESG programs. Such companies are deemed to outperform their competitors in the long run because they are preferred destinations for most investors conscious of global challenges, including the environment and socio-economic issues.