In the context of global climate and social challenges, attention to the non-financial aspects of business is becoming increasingly significant.
For investors, ESG factors are becoming an important part of assessing a company’s risks and opportunities. According to a survey conducted by the Morgan Stanley Institute for Sustainable Investing in 2024, 80% of institutional investors stated that they expect an increase in the share of sustainable investments in their portfolios over the next two years.
And according to forecasts from Bloomberg Intelligence, also from 2024:
— global ESG assets may reach $40 trillion by 2030, which will account for more than 25% of the projected $140 trillion in total assets under management;
— strengthening of regulation and oversight will increase trust and appetite for the ESG market;
— the trend toward sustainable development and sustainable financing persists despite geopolitical factors.
Why ESG affects investment resilience
- Improved access to capital
Financial institutions are increasingly focused on ESG risks when making decisions. International banks, sovereign funds, and private investors require disclosure of sustainable practices, especially when raising funds through “green” or sustainable bonds. According to Morgan Stanley research, 88% of corporate leaders worldwide view sustainability as an important source of long-term value creation.
- Reduction of operational and reputational risks
Companies that have integrated the ESG approach systematically manage potential crises: from environmental fines to labor rights violations. This reduces the likelihood of losses and litigation.
- Increased resilience to external shocks
Companies with developed ESG management adapt more quickly to changes in legislation, public expectations, and global challenges, which is critically important in conditions of instability.
- Transparency and trust
Proper ESG disclosure strengthens trust from investors, partners, and regulators. This is especially important for companies planning IPOs, obtaining credit ratings, or participating in international tenders.
- Competitive advantages in supply chains
International partners are increasingly requiring verified compliance with ESG principles. This is becoming a factor for access to global markets and supply chains. As an example — access to the European market for coffee sellers. Those producers who grew coffee by practicing deforestation or violating other biodiversity principles will be prohibited from selling in Europe.
Additional key aspects of an ESG strategy
- Growing influence of the “S” and “G” metrics
Disclosure of a company’s social responsibility — employee care, social responsibility, industrial safety, etc. (S), as well as corporate governance, anti-corruption practices, and digitalization (G) — is gaining more influence.
- Talent engagement and retention
Modern employees, especially the younger generation, are increasingly oriented toward employers with a clear social responsibility and environmental stance. ESG initiatives help attract and retain qualified personnel, increasing loyalty and productivity.
- Innovation and development of new markets
Implementation of ESG approaches stimulates innovative solutions — from environmentally friendly technologies to new business models that take sustainable development into account. This opens access for companies to promising segments and niches.
- Management of long-term value
A focus on ESG helps companies form a strategy aimed not only at short-term profit but also at creating sustainable long-term value for all stakeholders — investors, clients, society, and the state.
- Compliance with international requirements and regulations
The world is rapidly moving toward stricter mandatory standards for ESG disclosure and reducing the negative impact of business on the environment and society. Active ESG implementation helps companies prepare in advance for new requirements and avoid fines and sanctions.
Thus, ESG is a strategic tool that helps companies build sustainable business in a rapidly changing world. Integration of ESG factors opens new opportunities for growth and strengthens the trust of key market players, attracting responsible investors and gaining competitive advantages in financial markets. Successful ESG implementation is the key to adaptability and competitiveness in the future.
