The growing dominance of governance in ESG

As the calls for purpose beyond profit continue to grow, award-winning journalist Virginia Matthews spoke to Gareth Thomas about the shift in emphasis towards governance in ESG.

In an article on governance and ESG for Raconteur/The Sunday Times, Virginia highlights the risks businesses take when governance of issues such as modern day slavery appears to fail.

Not only can this lead to reputation-damaging headlines, it is increasingly likely to reduce access to capital. ESG asset managers are responsible for ever-larger funds. They also demand high standards of governance from the organisations in which they invest. Consequently for those seeking to access ESG capital, demonstrating robust and verifiable governance procedures is vital.

Commenting in the article, Gareth Thomas said, “While governance was once routinely relegated to outside organisations, it is now seen as critical by any business leader looking to shape an organisation’s thinking on issues such as bribery, exploitation and human rights. In short, governance is fast becoming a proxy for good management.

“During the 2007-8 financial crisis, client spending on ethical projects was swiftly and brutally cut. Now, however, the budgets allocated to supply chain management and human rights risk assessment, for example, have been maintained if not scaled up.

“Actively managing these complex governance-related risks requires a far broader set of capabilities than those associated simply with profit and loss.

“Making paper-thin pledges to do this and that in a corporate social responsibility report will no longer suffice. Demand among a range of stakeholders for independently verifiable governance procedures is rising fast. This is particularly true among younger investors who can spot greenwashing a mile away.”

To read the article in full, click the link below.