The S in ESG: Patrick Heisen (PwC)
This article was written in Dutch. This article is an English translation.
By Patrick Heisen, Partner at PricewaterhouseCoopers
How can investors interpret the S of ESG?
'Impact: Investors can focus their investment strategy on specific social objectives that they want to achieve with social impact funds. On the basis of analyzes of, for example, countries with regard to (the transformation of) access to health care and education, an image is created of the extent to which an investment can contribute to the objectives.
Integration: Investors can integrate S-factors into financial and non-financial risks material to investments. For example, this relates diversity and inclusiveness as the social factor to the market and reputation risk of an investment. By analyzing data from relevant S-factors, the risk picture of the investment in question is enriched.'
What is the business case for the S?
'Walk the talk: Our research shows that the majority of institutional investors have decided to stop or are considering stopping doing business with an asset manager if they do not sufficiently integrate ESG into their company policy. It is expected that more attention will be paid to governance and social factors in the coming two years.
Investing in companies: A healthy working environment, a living wage and strong employee rights cost money. However, companies that pay more attention to this are better positioned to be compliant, to prevent reputational damage and to retain their employees in a tight labor market. Investors in companies should consider not only the costs of such investments, but also the risks of not making them. When manifested, these risks can lead to visibly high operating costs.'
Walk the talk.