Apa itu ESG (Environment, Social, & Governance)

Summary

The video explains the growing significance of the ISG (Environmental, Social, and Governance) framework for businesses, highlighting its role in ensuring sustainability and long-term success. It discusses the benefits of adopting ISG practices, such as better investor relations, improved risk management, cost reduction, and enhanced brand reputation. The evolution of ISG is traced from its early origins in the 1900s to its modern integration into corporate strategies. The video also explores various stakeholder perspectives, including those of investors, regulators, consumers, and employees, emphasizing how ISG is shaping business decisions globally.

Takeaways

• 😀 ISG (Environmental, Social, Governance) is a framework where companies focus on responsible business practices for sustainability, enhancing long-term business viability.
• 😀 Investors use ISG reports to evaluate risk management within companies, which contributes to building stable and responsible companies both operationally and financially.
• 😀 Survey data shows that investors prioritize ISG aspects over factors like dividend payouts, profit margins, and revenues, indicating its growing importance in investment decisions.
• 😀 The adoption of ISG practices offers multiple benefits for companies, including stronger investor relations, more effective risk management, and reduced regulatory burdens.
• 😀 ISG implementation can reduce Human Resources costs, for example by attracting talent from a broader pool and reducing employee turnover.
• 😀 Research shows that companies with strong ISG practices tend to outperform global equity markets, with some portfolios outperforming by as much as 11%.
• 😀 Companies with strong ISG performance have better access to new markets, particularly targeting environmentally and socially conscious consumers like millennials.
• 😀 The goal of ISG is to create a sustainable business model, making investments more responsible while ensuring a company’s long-term stability and profitability.
• 😀 ISG practices evolved from social responsibility investing (SRI) in the 1900s, gaining momentum in the 1980s with increasing concerns about climate change and corporate responsibility.
• 😀 Investor demand for ISG integration has increased significantly, with a growing percentage of investments directed into ISG-focused assets (from 48% in 2017 to 75% in 2019).
• 😀 Regulatory bodies, like governments and financial regulators, are taking action to accelerate green finance and enforce better ISG-related disclosures, responding to increasing consumer and investor demand for responsible business practices.

Q & A

What is ISG, and why is it important for businesses?

ISG (Environmental, Social, Governance) is a framework that businesses use to operate responsibly, ensuring sustainability in their practices. It helps businesses mitigate risks, attract responsible investors, and maintain good governance, contributing to long-term success and a positive global impact.

How does ISG contribute to investor relations?

ISG enhances investor relations by providing transparency on a company's governance, risk management, and social responsibility. Investors, particularly institutional ones, want to know about a company’s policies on succession planning, auditor independence, compliance, and overall leadership practices.

What role does ISG play in risk management?

ISG practices help businesses reduce exposure to various risks, such as regulatory burdens, operational disruptions, and negative public perceptions. Companies with strong ISG frameworks experience fewer controversies and maintain better brand value, which improves financial stability.

What are some financial benefits of adopting ISG practices?

Adopting ISG practices can lead to cost reductions, particularly in human resources, by attracting and retaining a talented workforce. Additionally, companies that follow ISG principles tend to outperform the market, with studies showing they achieve better financial returns and increased shareholder value.

How does ISG help companies access new markets?

Companies with a solid ISG track record can tap into new consumer markets, such as millennials and socially-conscious consumers, who prioritize environmental and social responsibility in their purchasing decisions.

What is the history behind the development of ISG principles?

The concept of socially responsible investing (SRI) began in the early 1900s but gained significant momentum in the 1980s due to concerns over climate change. Over the decades, key global events like the 1992 Earth Summit and the 2016 Paris Agreement shaped the ISG framework, culminating in various global initiatives and sustainability reporting standards.

How did the 1992 Earth Summit influence ISG?

The 1992 Earth Summit in Rio de Janeiro brought together 172 countries to discuss critical issues like climate change, marking a significant milestone in the development of global sustainability practices. This event contributed to raising awareness about the environmental responsibilities of businesses and governments.

What is the significance of the UN Principles for Responsible Investment (2006)?

Launched in 2006, the UN Principles for Responsible Investment (PRI) introduced six investment principles that encouraged integrating environmental, social, and governance factors into investment decisions. This initiative helped promote responsible investing and solidified ISG’s role in investment strategies.

How do millennials view ISG, and what impact does this have on businesses?

Millennials are particularly focused on social and environmental issues, and they expect the companies they work for to reflect their values. A significant portion of millennials (76%) consider a company’s commitment to social and environmental causes when deciding where to work. This shift in expectations underscores the importance of ISG for attracting and retaining top talent.

Why are companies increasingly focusing on ISG in today’s market?

Companies are focusing on ISG due to growing pressure from investors, regulators, and consumers to adopt responsible and sustainable business practices. Additionally, adopting ISG practices helps mitigate risks, improve brand image, attract investment, and appeal to a more socially-conscious consumer base.