ESG as Sine-qua-non

By Frank-Jürgen Richter

June 26, 2023

In 2015, the United Nations proposed a radical framework of Sustainable Development Goals (SDG) designed at bringing a global effort to tangibly improve human life on earth. Known colloquially as the SDGs, the agenda has become a gold standard for initiative building, with 169 targets spread across 17 specific goals. Put together, these targets all aim to eradicate poverty, expand access to economic opportunities, support human rights, end violence and build a more sustainable world. All in all, the goals provide guidance for a path to a future that is inclusive, resilient, and forward-thinking. 

Over the years, the SDGs have moved into the center of global development, with stakeholders in various sectors integrating the framework into their existing systems. The SDGs have also expanded and been reshaped in line with specific themes—for instance in 2022, the UN’s annual SDG report was focused on the interlocking impacts of the climate crisis and COVID-19. 

However, over time, the good intentions of the SDGs have also resulted in not just companies using the framework for good publicity—but also some failure as stakeholders have under-financed or under-committed to the demands of the agenda. Increasingly, corporations are seen to prioritize profits and their shareholders’ demands rather than the more difficult goals of environmental protection or socio-economic improvement. 

Governments have also fallen short, despite their support for the agenda on the surface—many are seen to capitulate to the demands of business interests, resulting in the entire system being driven by capitalistic idealism, even if it comes at the expense of environmental degradation and human rights abuse. We can see throughout history how one side has gained at the expense of the other: the Industrial Revolution, for example, has resulted in significant losses of biodiversity and consumerist attitudes that has only resulted in further industrialization. Today, these have left us poorer in terms of our natural environment and conscientious consumer habits. 

At the end, government inaction and corporate inattention adversely impact the lives of everyday people. For instance, corporations’ lack of attention to their activities’ impact on the environment results in the contamination of local water sources or air pollution, all of which will harm communities’ health. With COVID-19, these impacts hit doubly hard as many low-income countries were forced to take on more debt to stave off the worst of the onslaught, not to mention rising inflationary pressures. 

Investors Have a Say

Investors can play a vital role when it comes to driving ESG imperatives among large corporates. As major stakeholders in the company, their voices can force company leadership to make better decisions that take into account the SDG agenda, as well as the welfare of the community their company serves. Thankfully, we see more and more investors become increasingly focused on the sustainability agenda, with emphases placed on clean energy alternatives and better social policies on slavery, wages, and labor rights. 

As a result, venture capital is gradually flowing into companies with a strong ESG focus. Regenr8 is one such impact investing venture company that invests in seed stage companies that work in four core areas – energy & the environment; food & water; circularity & zero waste; and social inclusion. Another is New Profit, a US-based venture philanthropy organization that has already invested over US$325 million in a portfolio of 165+ high impact organizations, leading societal transformation and change. Some of its supporters include Bain Capital and a host of other high-profile investors such as Accenture, Deloitte, Walmart, UBS, IBM, and the Bill & Melinda Gates Foundation.

There is also an increasing movement led by philanthropists and people in forcing and urging investment houses in divesting funding towards fossil fuel companies. For example, after years of sustained activism from students, Harvard University’s endowment fund has decided to no longer invest in fossil fuel companies, and instead plans to use its US$42 billion endowment to support the green economy.

These are positive developments from the investment moguls that is certain to change the course of ESG developments among large corporates, that have—up until now—been mostly focused on profits while also disregarding the social and climate impacts their actions have entailed.

More to be Done

Moving forward, more concerted efforts will be needed to make tangible movement towards realizing the SDG agenda. This must be a collaborative effort, featuring equal participation by the public, private, and civil sectors—no one party can shoulder all the burden and forcing this path will surely result in failure. 

Where the financing comes from to fund this future is a crucial piece of the puzzle. Funding houses and VC’s will need to increasingly push and support greener businesses and ideas that look to address and attain SDG targets of 2030. Governments will need to develop measures and policies that are both stringent and friendlier to ideas and innovations that target social and environmental good. 

It is by being together and being inclusive that overall public good can be achieved for the betterment of all.

Photo Caption: Companies must strictly adhere to prescribed ESG standards.