ESG 101
SEPTEMBER 22, 2021
Key topics covered
1. Setting the context for ESG
2. Introduction to ESG
3. Business Case for ESG
4. ESG Building Blocks & Ecosystem
5. A Case Study and Key Takeaways
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Sustainability
• /səsteɪnəˈbɪlɪti/
Noun: sustainability
the ability to be maintain an activity or resource at a certain rate or
level.
e.g., "the sustainability of economic growth“
avoidance of the depletion of natural resources in order to maintain an
ecological balance.
e.g., "the pursuit of global environmental sustainability"
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The 3 pillars of Sustainability
ECONOMIC SOCIAL ENVIRONMENTAL
Examples include: Examples include: Examples include:
• Shift from a carbon • Issues such as gender • Climate Change.
economy to a equality, diversity and • Dependance on
Knowledge-based inclusion. renewable sources of
economy. • A company’s direct energy such as solar
• Job creation, poverty effect on communities it power .
alleviation etc. operates. • Reducing GHG emissions
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169
17 TARGETS
GOALS
244
TOPICS
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ESG
• Environmental Social Governance
Financial Lexicon:
“a generic term used in capital markets and employed primarily by:
• investors to evaluate corporate behaviour, environmental and societal
impact to determine the future financial performance of companies.
• companies to report their sustainability impact and measure
progress”.
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Key components of ESG
ENVIRONMENT SOCIAL GOVERNANCE
• GHG Emissions • Labor Practices • Business Ethics
• Air Quality • Employee Health & • Competitive Behaviour
• Energy Management Safety • Legal & Regulatory
• Water Management • Diversity, Inclusion & Compliance
• Waste & Hazardous Equity • Critical Rick
Management • Human Rights Management
• Ecological Impacts • Community Relations • Competitive Behavior
• Data Security
• Access & Affordability
• Selling Practices
ECONOMIC
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Business case for ESG – The Why
STRATEGIC FINANCIAL OPERATIONAL
• Brand Reputation • Better access to capital • Market forces – price
• Business Model • Lower cost to capital volatility, market
Innovation • Boost Investor disruption
• New service / product confidence • Resource efficiency
growth opportunity • Operating cost reduction • Process optimization
• Risk Mitigation – • Compliance to regional • Supply Chain disruption
Environmental, regulatory requirements • Waste reduction
Regulatory. • Stranded Assets – Assets
• Technological resilience that have been affected
• Increased market share
• Enhance Corporate
Purpose
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Strategic case for ESG
STRATEGIC
• Brand Reputation A 2021 RepTrak survey said, 56% of respondents are not going to
• Business Model buy from companies handling Co-vid poorly.
Innovation
• New service / product In 2009, Harvard study identified Sustainability as a key driver for
growth opportunity corporate innovation and product ingenuity.
• Risk Mitigation –
Environmental,
Regulatory. Companies who have factored in ESG into their strategy has
• Technological resilience shown higher technological resilience, e.g. utilities, telecom.
• Increased market share
• Enhance Corporate Sustainability has emerged as key component in defining
Purpose corporate purpose, irrespective of the perspective.
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Financial case for ESG
FINANCIAL
• Better access to capital BlackRock, world’s largest asset manager with AUM of ~9T $,
states that non-ESG compliance may cut-off full funding.
• Lower cost to capital
Moody’s 2021 report identifies disclosure on significant ESG issues
• Boost Investor will increasingly affect valuations in high-risk sectors.
confidence
• Operating cost reduction In 2020, a Standard Chartered survey found 76% of Middle East
investors saw climate change as a grave issue with tragic results.
• Compliance to regional
regulatory requirements EU, US and APAC regulators are already signalling a form of
sustainability reporting by multinationals.
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Operational case for ESG
OPERATIONAL
• Market forces – price 3 out of the Top 10 risks identified by World Economic forum 2021
volatility, market is directly linked to ESG: Infectious Diseases, Livelihood, Climate.
disruption
• Resource efficiency and Global giants like FedEx have reported over 22% reduction in their
Waste reduction fuel consumption using ESG operational assessments.
• Process optimization KPMG survey of 378 CEOs found process optimization linked to
sustainability have resulted in over 31% saving over 3 years.
• Supply Chain disruption
• Stranded Assets Fitch Ratings 2021 study reports Climate Change driver GHG
emissions could render coal, oil and gas as ‘stranded assets’.
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What are Customers saying?
CUSTOMERS
• Improves customer A 2020 Customer Global Survey report states that 47% of the
satisfaction by current consumers would pay more for a sustainable product.
significant numbers
Demonstrating shared values of customers results in 72% sharing
• Positively increases to at least 6 people of their positive experiences.
brand loyalty
• Activation of New Fashion brands like H&M have stated used-clothes buy back
customer segments scheme as a big winner in enhancing their brand and profitability.
• Attract Millennial and Gen Z, who will make the majority of the consumer market in the
Gen Z customers coming years is willing to pay 50% more for sustainable products.
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What is in it for Employees?
EMPLOYEES
• Employee Engagement A 2018 CNBC study shows that 9 out of 10 millennials are willing
to take a pay cut to work for sustainability-focused companies.
• Employee Retention
• Diversity & Inclusion A BCG study that looked at 1700 companies, saw that firms with
• Gender Equality diverse management had 19% higher revenue due to innovation
• Mental Health &
Wellbeing Post Co-vid, Mental Health and Wellbeing, one of the elements in
‘S’ of ESG has been deemed critical for businesses globally
• Health & Safety
• Attract next generation A 2021 study by Anthesis reveals that 67% of Gen Z surveyed
talent found sustainability important while choosing an employer
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ESG Ecosystem
Information producers Information users
Software Frameworks / Analytics
Reporters Auditors Data Providers End Users Regulators
Providers Standards Platforms
Reporters Software Auditors use Conceptual Data providers Analytics Investors and Regulators are
(usually providers and standards as frameworks aggregate platforms other increasingly
corporate disclosure criteria against information and provide ratings stakeholders interested in
enities) Collect, platforms enable which they Disclosure topics make it available and advanced such as civil sustainability
validate, setup filers to collect provide external through analysis society information,
internal controls, and report assurance, and Disclosure technology capabilities. communities, with some
procedures, information. other related requirements tools. senior moving to
involve internal services. executives, mandate it in
audit, involve Software employees, accordance with
external audit providers also customers, standards.
and then publish help standard governments,
the information setters to build and suppliers
taxonomies and will consume the
information available data
validation and analysis.
pathways.
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REGIONAL REGULATORS
European Union, Non-Financial Reporting Directive (NFRD)
FRAMEWORKS
Provides principles and guidance for
how information is structured and
presented. Higher level, macro,
principle-based
Users of Non-
Financial
Flow of Information Information
Corporates
(NFI): Investors,
Regulators,
STANDARDS Stakeholders
Focuses on what information must
be presented based on relevance to
key stakeholders, namely investors,
regulators and corporates. Due
process, prescriptive, granular
PAGE 17 OF 20 Building Blocks of ESG Reporting
Commonly used ESG Reporting Standards and Frameworks
GRI SASB TCFD
UN PRI Vigeo EIRIS UN SDG
UN WEP CDP WEF SCM
UN GC CDSB BITC
IIRC MSCI B Corp
Oekom Sustainalytics FTSE4Good
DJSI SBTi ISO
EP100 EV100 RE100
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FedEx – An operational case for ESG through Innovation
OPERATIONAL
In 2009, FedEx used to Introduced Fuel Sense Program, which reduced the company’s fuel
deploy a fleet of 700 aircraft consumption by 36% while increasing capacity by 20%.
and 44,000 motorized
vehicles that consume 4 Introduced Boeing 777s and replaced its B 757s which reduced
million gallons of fuel a day. fuel consumption by a further 18%.
In April 2021, Developed a set of 30 software programs that help optimize
Federal Express raised aircraft schedules, flight routes, the amount of extra fuel on board.
US$3.25B equivalent
through Sustainable Hybrid vans that are 42% more fuel efficient and replaced more
Financing using its strong than 25% of its fleet with smaller, fuel-efficient vehicles.
ESG performance, making
its debut sustainable bond. FedEx improved its packaging solutions by sourcing recycled
material and ensuring their products are 100% recyclable.
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Key Takeaways
The current market trends are pointing towards a strong adoption of ESG both globally and in the
region.
There exists a robust business case for companies to adopt and report on ESG, be it from a strategic,
financial or operational perspective.
Both customers and employees are strongly aligned to companies that integrate ESG components
into their business and operational models.
It is about identifying the right ESG performance metrics that ensure a win-win for businesses to
achieve financial profitability, while contributing to the sustainable development of the region.
As an industry or a service expert, it is worthwhile to develop a deeper understanding of the various
ESG components that you directly or indirectly influence.
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THE END
THANK YOU FOR YOUR TIME!
