Global metric for ESG sustainability likely to evolve out of Covid-19 crisis
CAPE TOWN - A global metric to measure ESG (environment, social, governance) sustainability in companies is likely to be developed out of the Covid-19 pandemic, albeit over a long period, JSE Group chief executive Leila Fourie said this week.
Fourie spoke at a webinar on re-imagining capitalism. The other panellists included Harvard University Professor Rebecca Henderson and Gibs Ethics and Governance think tank founder and director Gideon Pogrund.
Henderson said “the world is on fire” and facing big challenges from environmental degradation, economic inequality and collapse, and threats to institutions.
“More and more people in the world can’t see how their children will be able to have the same lives they had, never mind a better life,” said Henderson.
Fourie said she had seen a massive increase in the size of investments into sustainable ESG-focused companies through the pandemic, and the crisis had shown that sustainable companies were more resilient to economic shocks.
She said that just like the development of Generally Accepted Accounting Practice, the framework for which developed over 10 years following the Great Depression in the US, so a global sustainable development measurement scorecard and measurement was likely to be developed following the Covid-19 crisis.
Such a universally accepted standard would be particularly beneficial for global groups that operate in many jurisdictions with different standards for ESG.
She described the growth in investment funds flowing into sustainable companies as “vertical”, and it was clear these investments had started to dispel the perception that there was a financial trade-off in investing companies that focused on long-term sustainability.
Henderson said: “We know we want ESG reporting and we want it now. On the other hand we know that many of the ESG measurements that we have are not that great.”
Fourie said that context was as important for such a measurement, such as a country’s extent of democracy, the economic cycle, and the extent of trying to build social inclusivity. For an investor, it would be important for them, through reporting, to know their funds were being used to further these goals.
She said South Africa had severe water, energy and agricultural land resource problems, a large carbon dependency which was tied to a large number of jobs, as well as the highest unemployment rate among its youth in the world.
On the other hand, the recent challenges had shown that its institutions such as the judiciary were “alive and well”, although the strength of the institutions needed to be maintained.