Show a tangible link between ESG and performance

Hope you are doing well. Welcome back to our brief thoughts on ESG.

This week we looked into a study conducted by McKinsey that shows that a considerable segment of the investment community wants to see more tangible links between ESG development and financial performance. Here are some key takeaways and recommendations we want to share with you on integrating corporate ESG strategies into equity stories:

“While more than 95 percent of S&P 500 companies issue a sustainability report, very few fully integrate environmental, social, and governance (ESG) into their equity stories.”

Reporting comprehensive, quantitative, and actionable information is a best practice. But for investors to fully value and incorporate this information into their models, it is helpful to show how the efforts that are portrayed in that information help your business be more profitable, grow faster, or protect it.

“Investors find that excellence in different pillars is required based on a company’s sector.”

Your business doesn’t have the same concerns and opportunities as your competitors’ (even close competitors). Sticking to what’s most important to you and your stakeholders is key if you want to be able to optimize your impact.

“An effective equity story improves investor understanding of how the company is using ESG to raise the odds for outperformance and address risk.”

Make sure that your investors have visibility on how your ESG strategy plays and important role in building your resilience and adaptability as you move forward. Describe how your sustainability plans will have an impact on growth, cash flow, returns, margins, and brand enhancement among its peers.

“A significant majority of chief investment officers are prepared to pay a premium for companies that show a clear link between their ESG efforts and financial performance.”

We believe over time this will only be more and more relevant (despite all the criticism ESG gets). But as with other things, structuring a best-in-class strategy is only part of the equation; you also need to be able to communicate it properly.

I hope you found this interesting. As usual, if there is anything we can help you with, or if there is an ESG topic you would like to know more about, please let us know.

Best,

Marimar

CEO, Miranda ESG