Did you know that corporate reporting for ESG in the United States is starting to gain some traction? You may have read or seen some recent reports about this new trend. But what exactly is ESG? Who does it impact? And what are your responsibilities for compliance and corporate reporting?
ESG stands for Environmental, Social, and Governance, and refers to the three central factors in measuring the sustainability and societal impact of an investment in a company or business. These metrics help investors understand how well a company performs as a responsible global citizen in addition to its financial performance.We’re seeing ESG in the United States becoming an increasingly important topic to explore and discuss, especially as it relates to the oil and gas industry. According to a recent study conducted by MSCI, approximately $1 trillion in capital is influenced by ESG considerations, representing a 23% growth since last year.
ESG & SEC Guidelines
The Securities and Exchange Commission (SEC) has been encouraging companies to disclose more information relating to ESG in the United States. They have adopted rules that require companies to disclose more information about climate risk and other environmental aspects of their business operations.
These disclosures are intended to allow investors and other stakeholders to better understand a company’s exposure to environmental risks, including the impacts of climate change, as well as opportunities for managing those risks.
The SEC announced new guidelines for public companies in February 2020. The disclosure rules cover a wide range of issues, including: greenhouse gas emissions; water use; waste generation and management; material sustainability efforts; air quality; a number of equal opportunity factors; and the way a company makes decisions affecting these policies.
Many public companies have started reporting their climate change policies under these new guidelines, along with any other material governance and business risk associated with climate change.
For example, oil and gas companies may need to disclose how they will be affected by rising sea levels or changing weather patterns as a result of climate change. Companies in this industry should take note that while they may not be directly impacted by such risks today, they could be tomorrow or in the next few years if no action is taken.
Why is ESG Important for Companies in the United States?
An ESG score is a way for investors to measure the sustainability of a company and its impact on society and the environment. Investors are using ESG metrics to understand how well a company performs as a responsible global citizen in addition to its financial performance, which can ultimately affect a company’s profitability based on investor and consumer confidence. ESG metrics include:
- Environmental Impact (carbon footprint, pollution)
- Social Impact (employee treatment, diversity & inclusion)
- Governance Metrics (corporate governance)
Companies with proactive ESG practices often fare better than those without them. This is because sustainability helps attract investors who want a positive impact on our planet and society at large through investments in green energy projects or new technology for reducing dependency on fossil fuels.
These positive ESG practices attract conscientious employees to join your team and even have an effect on your customer base. With today’s savvy consumers, ESG metrics significantly influence purchase decisions. Consumers who are increasingly aware of environmental concerns want to support companies that share their eco-friendly and social values.
In recent years, investors and consumers have become increasingly interested in how companies in the United States are managing their environmental impacts—and they want to know that their money isn’t being used to support pollution practices or discriminatory policies. This has led to a growing number of investment funds that exclude certain companies based on their environmental history and labor practices.
As more people consider how they want their investments to align with their values, we expect more investment products will be created that incorporate ESG into investment decisions (i.e., mutual funds).
How can Valicor help you meet ESG requirements?
Valicor helps companies identify sustainability improvements around waste management and assess their performance in relation to ESG standards. We also provide documentation to assist with your company’s compliance requirements for ESG in the United States.
Whether your company is in need of centralized wastewater treatment, oil processing and recycling, or other industrial waste management services to support your ESG goals, Valicor has solutions for your company. Check out our waste management solutions here.
The Short and Sweet
Remember when you see a reference to ESG: ESG stands for “environmental, social and governance” and refers to the impact of a company’s activities on the environment and its workers.
While ESG in the United States is still in its early stage and not yet mainstream, it’s growing quickly. The report indicates that the number of U.S. investors with ESG portfolios has increased by 100% since 2017 and that part of this growth comes from increased interest in socially responsible funds among millennials.
As more companies and investors become aware of the financial risks posed by climate change, they are looking for ways to mitigate these risks through investments that align with their values and beliefs as well as financial returns. We believe this trend will continue even if we don’t see additional changes in policy or regulation around ESG investing anytime soon.
Contact us for a personalized consultation to learn how Valicor can help your company meet its ESG goals.
