Increased environmental, social, governance (ESG) investment correlates with higher profits, according to new research from the Infosys Knowledge Institute.
“There is nothing novel about the idea that you have to spend money to make money. However, many companies are not applying that strategy to ESG as they do for other parts of their business. Companies must shift views to recognize ESG as a value creator to reap the financial benefits of ESG investments and to achieve maximum impact in creating a better, more sustainable world,” says Infosys president Mohit Joshi.
From PR Newswire:
- The report found that a 10 percentage point increase in ESG spending correlates with a 1 percentage point increase in profit growth. A company that currently spends 5% of its budget on ESG can expect a one percentage point profit increase if it aligns operating or capital budget to increase ESG spending portion to 15%.
- Many companies focus ESG efforts on the environmental segment with commitments to carbon neutrality, net zero and reducing greenhouse gas emissions. However, there are also opportunities to improve financial results through social and governance initiatives.
- ESG leadership strategy correlates with a 2 percentage point increase in profit and revenue growth. Companies perform better financially when they demonstrate a chief diversity officer (CDO), chief sustainability officer (CSO), ESG committee on the board and when the CSO clears capital expenditures for ESG initiatives.
- One-quarter (27%) of those surveyed say their company has all four components in place.
- Research found that almost all companies are interested in aligning their ESG goals with their supply chain, especially as more companies are expected to account for their Scope 3 greenhouse gas emissions. However, less than one-third share ESG expectations or requirements for suppliers.