With environmental, social and corporate governance (ESG) considerations now capturing the attention of both potential and willing investors, companies are looking to adopt a different approach to the way they manage both operations and reputation.
Beatriz Araujo, partner at Baker McKenzie and head of the Corporate Governance practice, states that directors now need to look more at ESG as both risks and opportunities in what she observes as the rise of stakeholder capitalism. This is when decision-making in the boardroom extends to the consideration of all stakeholders — particularly those who are concerned about ESG.
Businesses looking to be seen as highly valued are now keen to ensure that their ESG measurement is in place. As Baker McKenzie partner and global chair of the Global Industrials, Manufacturing and Transportation Group Nikolaus Reinhuber notes, up to 90% of decision-makers in M&A, acting as investors, are now looking specifically at ESG. Instead of focusing solely on profit generation in the short term, companies are now considering more long-term, sustainable factors to showcase plans for success.
An increased appetite for investment opportunities with strong ESG means that the unwavering focus on sustainable development goals (SDG) is no longer just a moral impetus, it's increasingly essential for business.
Against the challenge of demystifying the risks of ESG due diligence, how will companies now compete for investment? Watch the FT Big Deal video, Is ESG prompting the end of shareholder primacy? to find out more.