Earlier this month, High Meadows Institute President Chris Pinney joined colleagues in the corporate and financial sectors to discuss the complexities of climate risk and environmental, social and governance (ESG) investing. Deutsche Bank held its first annual ESG Investing Conference in Boston on November 1st to address the growing impacts climate change and short-termism have on businesses and investors.
Hard hitting topics that were discussed throughout the day included the opportunities ESG integration presents investors in uncertain times, what the transition to a clean energy economy could look like for companies and communities, and what the ESG investment space is like today and what it may be like in the future.
Despite this wide range of topics, recurring themes that were brought up in all conversations included the importance of incentives to change existing behavior and materiality to achieve better financial outcomes. Most participants agreed that incentives currently work against clean energy and other longer-term investments strategies. Solutions to this problem include shareholder advocacy to pressure corporations and better engagement between companies, investors and analysts to align ESG approaches. To increase the focus on material ESG issues, panelists suggested scenario analysis to understand the impacts of potential future risks, in addition to more unified standards and metrics to ensure businesses and investments are better managed.
Chris’ remarks focused on some of the myths and realities on the current state of ESG integration and the need for investors to move beyond a perception of ESG as only risk management. He noted that to realize the full value of ESG, investors will need to approach ESG investing through a value creation lens and understand the contributions that ESG factors can make to operational efficiency, growth and risk management. Chris mentioned that HMI is working with a number asset owners and managers to develop an industry-driven framework for this approach to ESG integration and invited participants to learn more about this forum by visiting the website.