Two years after the pandemic shook the world, global environmental, social and economic dynamics have been drastically changed or put into question.
In the corporate world, economic performance and solely financial principles have been proven insufficient in tackling profitability in the long term. And although the need to include environmental and social concerns has long been a relevant factor for businesses, the disruptiveness of the COVID-19 crisis has made these latter concerns unequivocally urgent and fundamental.
In fact, ESG investment criteria has become a reference point for investors and companies alike in the achievement of sustainability and corporate social responsibility objectives as a means for economic growth.
But as we enter the new year and face increasingly complex challenges, the world calls for a shift of perspective to better understand and dive into what our society and planet need in order to thrive.
The ‘S’ in ESG
As environmental and good governance practices prosper and continue to develop, the pandemic has revealed and exacerbated many of the social challenges that we seem to have left behind.
Social inequalities such as gender and racial discrimation, lower wages or the effect of climate change in vulnerable communities are among the issues likely to be most notable for the years to come. This creates unstable conditions for societies to prosper, which inevitably affects companies’ and investors’ ability to produce the economic growth necessary to sustain themselves.
Additionally, the pandemic has accelerated and imposed new working models that challenge traditional relationships and management of employees and other relevant stakeholders, making companies reformulate corporate culture and values in order to successfully engage employees with the purpose of the organization.
Many factors suggest that the reason why investors or companies have put these concerns behind is due to the lack of accurate data and methodologies to measure their social performance. The lack of precise metrics has drastically slowed down improvements, initiatives and even legislation surrounding social questions.
Social Investment in 2022
The good news is investors seem to be aware of the complexity and urgency to focus on social concerns as much as environmental or governance ones, as they are inevitably all intertwined. In this regard, the trend in the financial market points towards an increasing oversight of social risks and impacts as a result of both voluntary and mandatory initiatives.
Companies and investors are adhering to the growing demand from markets, governments and individuals themselves for better and more complete reporting and disclosure of their financial activities’ impacts in society.
- Initiatives such as the European Taxonomy have made these compromises with sustainability and social responsibility a regulated reality that could lead the global community towards a greener future. The latter intends to make sustainable investment easier and more transparent by setting robust objectives and regulated disclosures of precise non financial information.
- SDG’s also represent an important milestone for social responsibility, as two thirds of the seventeen objectives are concerned with the strengthening of social matters, recognizing social sustainability as central to growth and development.
The importance of responsible investment
As mentioned earlier, one of the main obstacles towards the achievement of social improvements is the lack of clearly defined and measured objectives or methodologies that open up the way to understand what needs to be done and how it needs to be attended to.
However, understanding that this process is a continuous and long term path for improvement might be the key to progressive advances. In this process investors have an essential role through their strategic choices to invest and promote activities, initiatives or policies that support and strengthen social sustainability.
Just as much as consumers can influence companies to change and improve their practices through their behavior and habits, investors can affect the market’s trends too. Experts agree that a focus on responsible investments, both in the voluntary and mandatory realm, can encourage and impact better human capital management, diversity, equality, engagement and overall social stability, which is, at the same time, a pillar to sustain environmental and governance factors as well.
Transparency and disclosure
In DoGood we believe transparency can be a defining factor for more responsible and sustainable decisions, as well as a key element for good corporate governance where disclosure processes are followed so as to provide regulators and shareholders as well as the general public with precise and accurate information about the financial, operational and other aspects of the company.
We have developed a corporate government tool that helps establish ESG impact quotas for employees in regards to the sustainability strategy of the company. Through our SaaS technology we are able to activate and track employees’ impact, creating engagement that translates into improved ESG metrics, reputational value and an overall positive impact for the environment and society.
If you want to know more about how we work to create a positive social and environmental impact, click here.