Why ESG scores really do matter

Now, more than ever, we are experiencing the true impact of climate change – heatwaves, droughts, floods and extreme weather.

Green finance needs to be at the forefront of a global economy that has been rocked by the Covid pandemic as we face years of climate and financial uncertainty.

This is where the true value of ESG for a company will increasingly come into play.

As investors have become more conscious of the ESG factor, companies are scrambling to meet investors’ expectations. And this highlights one of the major problems we are all facing today : why does a good ESG score matter?

It matters on several levels. At the most basic level, a bad ESG score may equal a higher discount rate for investors. And vice versa.

So, how do you achieve a high ESG score/rating?

This is where things get a lot less clear. There are many individual ESG rating systems, from ISS | Institutional Shareholder Services, CDP, and then commercial entities such as MSCI Inc., Sustainalytics, and S&P TruCost.

All of the above services apply different criteria and ratings for each individual element in an ESG evaluation.

In Hong Kong, the Hong Kong Stock Exchange (HKEx) has, since 2016, required listed companies to include an ESG report within the annual report.

Most notably, there has been a hardening of disclosures from “optional” to “mandatory”.

This subtle but significant change has caught a few companies out.

This is where companies such as Ascent Partners will be able to help. We have over 6 years of experience in preparing over 350 ESG reports for disclosure.

And we are fully transparent with our clients – all the metrics and materiality are disclosed to the client, whether it be for a listed company or a fund looking at investing in a company.

This type of transparency is necessary now, due to the “greenwashing” effect that has become more prevalent over the last 4 or 5 years.

The lofty aspirations of countries to achieve carbon zero within our lifetimes may seem an eternity away – but starting now we must all come together, as a global community, and drive towards a brighter and sustainable future.