Environmental, social, and governance issues can influence investment portfolios’ performance in ways very few people can imagine. For this reason, most investment funds, institutional investors, and philanthropists are increasingly incorporating ESG issues into investment analysis and decision-making processes. Likewise, investors turn to ESG consulting firms to get a head start on impact investing services and invest for a purpose rather than returns only.
ESG consulting firms play a pivotal role in helping investors and companies create value while engaging in impact investing. The firms are also helping create value in several ways, not limited to what is listed below.
Uncovering top-line growth areas
ESG consulting firms provide crucial insights that help companies, individual investors, and organizations discover new areas with tremendous investment opportunities while adhering to ESG principles.
By providing in-depth market analysis of various impacts investing opportunities, would-be investors have been able to tap into new opportunities, generate significant returns for shareholders, and in return have a significant social, environmental, and governance impact.
ESG Consulting firms are also helping investment managers allocate capital to more promising and more sustainable investing firms opportunities with prospects of higher returns. Renewables, water reduction, and management are some of the areas with tremendous potential for value creation.
Cost Reductions By ESG Consulting Firms
Spiraling costs have been one of the biggest un doings for many entities looking to generate substantial shareholder value. ESG consulting firms are coming in handy in helping firms combat rising operating expenses such as the cost of raw materials, thus ensuring their operations are as efficient as they can be.
Costs can affect profits by as much as 60%, seen as one of the reasons there is a significant correlation between resource efficiency and financial performance. ESG consulting firms help firms identify areas where costs can be cut without interfering with the production chain.
Cost cuts likewise go a long way in helping firms save a lot in many ways while ensuring high-efficiency levels. FedEx is one such company looking to cut operations costs by converting an entire fleet of 35,000 cars to electric or hybrid engines.
By turning clean energy powered fleet, the company will save a lot on fuel consumption and reduce its carbon emission footprint highly needed to conserve the environment and in line with ESG principles.
Reduced regulatory pressure
Companies that can focus and tailor their operations to addressing environmental, social and governance issues are less likely to come under regulatory scrutiny. This is an area that ESG consulting firms are coming in handy in helping companies at risk of constant regulatory scrutiny given their business nature.
Regulatory pressures can affect as much as 25% of profits in the healthcare and pharmaceutical industry. In the banking sector, regulatory pressure can affect as much as 50% of profits, given the interactions that such entities have with customers.
ESG consulting firms help firms that interact with customers address a variety of environmental, social, and governance issues in a bid to deflect regulatory pressure that can eat into profits in the form of fines.
Improved employee productivity
Firms that address environmental, social, and governance issues, effectively are always likely to attract and retain quality employees. It’s long been observed that employees with a sense of satisfaction regarding governance, environment, and social aspects perform much better. Social impact correlates with higher job satisfaction.
Likewise, ESG consulting firms share insights on the best ways to enhance employee motivation and instilling a sense of purpose. A weaker ESG proposition can go a long way in dragging productivity down, therefore affecting value creation.
By keeping top talent happy, companies and firms are always able to get the best from them, crucial to increased productivity. While employee satisfaction directly correlates to productivity, the same goes a long way in ensuring enhanced value creation for the company and shareholders at large.
ESG focused investments are expected to increase steadily as it becomes clear that one can still generate significant returns while positively impacting environmental, social, and governance issues. As such, ESG consulting firms such as Altruist league help organizations serious about improving the world uncover highly prospective sustainable investments.