Our newsletter, to be delivered twice monthly, will explore pertinent issues related to smart technology, clean energy and sustainable agriculture. Our goal is to keep a finger on the pulse of industry trends and how they relate to Novus’s goals and success.
How companies can measure ESG returns
ESG investing is one of the hottest strategies in recent years. Globally, a third of all professionally managed assets are subject to ESG criteria – representing about $30 trillion. Europe has led the charge, but the U.S. is currently seeing rapid growth in this category.
For investors, pursuing portfolio assets with demonstrable success in implementing benchmarks in environmental, social and corporate governance is a win-win. It’s the pursuit of profit as well as a means of promoting their vision for the future.
But often, companies themselves are slower to adopt ESG initiatives. As the Harvard Business Review points out, many CFOs are adept at analyzing ROI and EBIT. But the metrics by which they assess profitability can make actions like wastewater and emissions reductions look more like costs than values. This perception, in turn, can make them hesitant to grant the internal financing that would make it possible for the company to scale up its ESG efforts.
To help CFOs analyze gains on sustainability endeavors, the New York University Stern Center for Sustainable Business developed the Return on Sustainability Investment (ROSI) analytic method. This five-step process — which should include input from senior leaders in finance, marketing, operations, human resources and investor relations — includes the following actions:
- Identifying existing policies.
- Pinpointing corresponding adjustments to operational and/or management processes.
- Examine the nonfinancial benefits of these policies and practices.
- Calculate monetary benefits of these policies and practices by comparing to known benchmarks.
- From there, determine the total monetary value.
In Other News
England’s Prince Charles has announced a corporate sustainability effort called Terra Carta. This economic recovery plan asks companies to contribute $10 million toward sustainable investment and take sustainability into account as they plan their recoveries from the coronavirus.
Fanning the flames...or not
In recent years, utilities have increasingly turned to burning biomass as an alternative to coal. But new research suggests this power source isn’t nearly as effective toward achieving carbon neutrality as previously thought. Scientists suggest harnessing the power of solar instead.