Global expansion of ESG poised for boost in Ghana
Adoption of environmental, social and governance ("ESG")
criteria is increasing throughout the world and helping spur an
increase in capital expenditures for ESG compliant projects.
ESG has dramatically accelerated in 2020 and is no longer an option
exercise, but rather now a business imperative to understand and
implement. Now, actions by investors, shareholders and activists
increasingly focus on ESG topics including climate change,
pollution, diversity, cyber security and executive
compensation.
Looking forward, it's likely regulation and reporting will
continue to intensify in jurisdictions throughout the world —
as investors and activists put more pressure on corporate
leadership to deliver the ESG performance.
Europe a leader in ESG adoption
Europe now accounts for 65% of all the world's ESG-related
regulation. Since 2018, over 170 ESG regulatory measures have been
adopted at the national and European Union (EU) level.
A case in point is the Non-Financial Reporting Directive, which
obligates companies to report on a wide variety of ESG-related
metrics. And the European Commission recently published a list of
environmentally sustainable economic activities.
This changing landscape influences how, and in which sectors,
companies and funds invest, as they consider specific ESG
strategies to adapt to this changing landscape.
ESG risk management poised to increase
As investment decisions are increasingly influenced by this new
environment, so too is the role of risk management with a focus on
boards of directors. Directors' duties are already under
growing scrutiny, and this will deepen as regulatory frameworks
tighten.
Who is responsible for ESG topics on the company board will not
just be a matter of "nice to have" but essential if the
duties of directors are adequate. These topics need to be at the
heart of corporate decision-making.
ESG set to boom in Africa
The move towards ESG investing is not just occurring at a global
level but in Africa as well.
There are many sustainable projects, innovations and businesses in
Africa which are aligned with ESG criteria. The key to unlocking
this potential is to help investors become comfortable with the
risks of investing in developing markets, as well as in the
identification of sustainable investments that will deliver
profitable returns. In Ghana, for example, green buildings have
grown in popularity, among a variety of other investment
options.
The cost of not understanding this dynamic and not applying it is significant. For example, in the current market, assets or investments with ESG characteristics are experiencing a green value premium. And in future, are likely to continue to – across asset classes and industry verticals.
Sources
www.knightfrank.com
www.mondaq.com
www.insurancegateway.co.za
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