A new trend gaining grounds is that investors are beginning to double-check a company’s environmental, social, and corporate governance risks before investing in such a company.
Analysis, however, has shown this could reshape the global investment landscape, leaving companies that refuse to change behind.
A company’s environmental, social and governance (ESG) record will play a vital role in attracting investors, government approval and licensing, and international business.
According to some of the world’s largest financiers and lenders, the ESG is a tool by which they measure and decide whether to spend investment dollars on a company.
The world’s largest private equity firm, Blackstone, in its 2021 ESG report stated that the ESG principles serve as guidelines by which the firm is run; approaches investing; and partners with the assets in its portfolio.
Similarly, the African Finance Corporation also disclosed that it ensures that it carries out lending, investment, and advisory services to its clients and counterparts in a manner that is not negatively impactful on the environment and which ensures sustainable development.
However, some private equity firms that largely source capital from institutional investors such as pension funds, endowments, and sovereign wealth funds are strongly being pressured to fund these ESG – responsible companies.
