For the successful integration of environmental, social and governance (ESG) elements in an organisation, every person must embrace an ESG mentality. The ESG mentality must saturate every level of operations and decision-making.
This was expressed by certified ESG analyst Elysia Teh during her online talk on “What is ESG Integration?” on 22 May 2023. The event was organised by WOU Academy in conjunction with the National Training Week 2023, and attended by over 50 people.
She said ESG integration encompasses the consideration of ESG factors “in the day-to-day operations, systems, structures, management practices and corporate culture” of the organisation.
She explained, “You have that mentality and are applying its principles in decision-making and project implementation. With this mentality, it will allow you to meet the standards that the investor wants, leading to your company being selected for funding.”
She said investors and assets managers rely on ESG factors in their decision-making process. “You must therefore show that you are a good company to invest in, potentially with high returns on investments, low human resources turnover, clean management, and with all the required certifications, including ISOs, in place,” she elaborated.
Teh shared about the United Nation’s (UN) Principles for Responsible Investment (PRI) for investors when they contemplate which companies to invest. The six principles focus on the need to incorporate ESG issues into investment analysis and decision-making processes, policies and practices, and on the appropriate disclosure of ESG issues by the companies in which they invest.
She reiterated, “You must train the entire organisation to think ESG. With an ESG mentality, everyone will know their role, and are clear and focused about ESG integration. It will influence the company to do the right thing at every step, which in turn will lead to the right results and what the investor wants. Everything starts with mentality.”
“The ultimate purpose of ESG is to reconcile economic development with environmental protection,” she stressed.
Teh noted that companies are competing for investment funds, and most often asset managers make decisions through the information of the rating companies, public perception, research data, financial reports and so forth.
She therefore called for the building of an ESG platform in Malaysia, so that the ESG ratings and principles are more country-specific, and not based on US criteria. “Our government should step up in this aspect and build an ESG platform so that we have a country-specific platform for ourselves,” she said.
Earlier in her talk, she mentioned the origins and the coining of the term, ESG. In 2004, the then UN Secretary-General, Kofi Annan, “had asked all major financial institutions to collaborate with UN and the International Finance Corporation in identifying ways to integrate ESG concerns into capital markets”.
She pointed out, “So, ESG is an investment decision-making mentality”.
She said statistics have regularly shown since 2004 that big companies along with their portfolio companies that adopt an ESG mentality are strong and often sail through the financial crisis.