Updated: Jun 28
Adoption of environmental, social, and governance (“ESG”) criteria is increasing throughout the world and helping spur an increase in capital expenditures for ESG compliant projects. ESG has dramatically accelerated in 2020 and is no longer an option exercise, but rather now a business imperative to understand and implement. Now, actions by investors, shareholders and activists increasingly focus on ESG topics including climate change, pollution, diversity, cyber security and executive compensation. Looking forward, it’s likely regulation and reporting will continue to intensify in jurisdictions throughout the world — as investors and activists put more pressure on corporate leadership to deliver the ESG performance. Europe a leader in ESG adoption Europe now accounts for 65% of all the world’s ESG-related regulation. Since 2018, over 170 ESG regulatory measures have been adopted at the national and European Union (EU) level. A case in point is the Non-Financial Reporting Directive, which obligates companies to report on a wide variety of ESG-related metrics. And the European Commission recently published a list of environmentally sustainable economic activities. This changing landscape influences how, and in which sectors, companies and funds invest, as they consider specific ESG strategies to adapt to this changing landscape. ESG risk management poised to increase As investment decisions are increasingly influenced by this new environment, so too is the role of risk management with a focus on boards of directors. Directors’ duties are already under growing scrutiny, and this will deepen as regulatory frameworks tighten. Who is responsible for ESG topics on the company board will not just be a matter of “nice to have” but essential if the duties of directors are adequate. These topics need to be at the heart of corporate decision-making. ESG set to boom in Africa The move towards ESG investing is not just occurring at a global level but in Africa as well. There are many sustainable projects, innovations and businesses in Africa which are aligned with ESG criteria. The key to unlocking this potential is to help investors become comfortable with the risks of investing in developing markets, as well as in the identification of sustainable investments that will deliver profitable returns. In Ghana, for example, green buildings have grown in popularity, among a variety of other investment options. The cost of not understanding this dynamic and not applying it is significant. For example, in the current market, assets or investments with ESG characteristics are experiencing a green value premium. And in future, are likely to continue to – across asset classes and industry verticals. Sources www.knightfrank.com www.mondaq.com www.insurancegateway.co.za Cynthia Quarcoo is the Founder and Managing Partner of CQ Legal & Consulting, a boutique law firm based in Accra, Ghana. She has a keen interest in Finance, Energy, ESG and Private Wealth Management.
For further information, please contact: Cynthia Quarcoo, Founder and Managing Partner, CQ Legal firstname.lastname@example.org