Corporates can mitigate a range of risks by embedding ESG principles into their business strategies
In a session on managing the intersection of people, capital, and risk, panellists at the RIMS-WTW Asia Pacific Risk Virtual Conference said organisations could enhance risk management by taking a forward-thinking approach to ESG.
“I think first boards need to recognise that something has shifted in the business world,” said Su-Yen Wong, chairman of the Singapore Institute of Directors.
Wong said “investors are starting to hold companies to account for their ESG performance”.
“From a board perspective, you really need to think about how your company will be funded, how you will be seen in the marketplace from a reputational perspective, and from a sustainability and existential perspective,” Wong added.
Governments across the region were also likely to pass ESG responsibility “onto the business sector”, while regulation on ESG would continue to emerge in different jurisdictions, she said.
More opportunity than challenge
Wong described ESG as an opportunity rather than a challenge for companies.
“Disruption always brings about opportunities, and for those who can actually see the opportunities and are able to adapt, there’s actually tremendous upside,” she added.
Kevin Bates, RIMS board member and group head of risk and insurance at Lendlease, said a focus on ESG could lead to positive business outcomes beyond risk mitigation.
“This can be minimising environmental liabilities, lowering costs, increasing profitability, or reducing regulatory issues and litigation.”
Emphasis on social responsibility could help businesses improve productivity in the workforce, boost morale, and reduce turnover and absenteeism, Bates added.
Meanwhile, focusing on governance could generate positive outcomes by aligning the interests of shareholders and boardrooms, and “avoiding unpleasant surprises”, Bates added.
There were also financial reasons to pursue a strong ESG strategy, Bates said.
“Sustainability initiatives at corporations appear to drive better financial performance.”
Hugh Andrew, managing director at BlackRock, agreed: “According to a recent survey, the long term financial position of a company is better with a strong ESG policy or programme.”
Putting people first
Approaches to ESG may differ depending on the size of the company and ownership structure, Andrew said.
“The governance part [of ESG] is understanding what the owners want. There’s a vast difference between shareholders in a fund and a private family office… So it’s important for the board, under the auspices of the governance committee, to understand what the owners want.”
When approaching the social element of ESG, it was important for risk managers and board executives to understand the contrasts between different cultures across APAC, Andrew added.
“While we all believe that DE and I [Diversitiy, Equity and Inclusion] policies are important, we can’t just impose western values. We need to be broader shouldered than that and need to think about the cultural issues that affect investors that come from those countries.”
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