Showing sustainability impact will silence the sceptics

Adding economics to ESG can demonstrate that companies can pursue green initiatives and be financially viable.

- By Lawrence Loh and Ang Hui Min

Top-down scepticism in the US about environmental, social and governance (ESG) issues has led to worldwide repercussions.

Since US President Donald Trump was inaugurated in January, he has passed executive orders and policies that are detrimental to environmental and social protection.

An analysis by The Guardian found that within 100 days of Trump’s inauguration, there were 145 actions relating to loosening environmental regulations and increasing the use of fossil fuels.

International environmental agreements and frameworks, such as the Paris Agreement, were dismissed. Just recently, in August, a net-zero framework for the global shipping sector was rejected.

On the social front, US government diversity, equity and inclusion programmes were deemed “wasteful”, with moves to cut these programmes and related staff.

The backlash against ESG continues. Some Republican states, such as Texas, have rolled out policies against firms’ pro-ESG investing strategies.

There were also media reports of an exodus of banks from the Net-Zero Banking Alliance, a global initiative in support of the Paris Agreement. The banks that have announced their withdrawal include not just US banks, but also those from Europe and Japan.

The examples seemingly illustrate scepticism for ESG because there are no economic benefits. Does this mean game over for ESG?

ADD ECONOMICS

In our opinion, it is still game on for ESG. We just have to add a second “E” — for economics - into the equation, such that it becomes EESG.

The EESG approach allows companies to cater for economic viability: First, they have to survive financially; second, they can use profits to drive ESG initiatives.

This approach also helps firms gain more profits. ESG initiatives, such as waterand electricity-efficient installations, lower utility bills and contribute to savings.