Think ESG: Finding the path to ESG-linked financial value

Environmental, social and governance (ESG) performance, and how it is reported has gained significant attention across the market — as investors continue to drive for more consistent and transparent ESG metrics that will help them better assess corporate health and long-term value.

The EY Global Institutional Investor Survey found that 89% of the investors said they would like the reporting of ESG performance — measured against a set of consistent standards across the globe — to become a mandatory requirement.

While many corporations are reporting on their ESG performance and financial performance, they are often not reporting on how the two relate. The challenge most businesses face is proving the monetary impact of their sustainability efforts. So, the Center for Sustainable Business at the New York University Stern School of Business developed a Return on Sustainability Investment (ROSI) methodology to bridge the gap between sustainability strategies and financial performance, helping to build a better business case for both current and planned sustainability initiatives.

The pace of change in ESG reporting continues to accelerate. Corporate leaders across the organization should recognize and address the ESG needs of investors and all their stakeholders to create sustainable, long-term value.

Key takeaways:

• Many sustainability strategies can drive better financial performance through cost reduction.
• Products marketed as sustainable are driving product and category growth. Companies are now beginning to respond to changing consumer preferences, and meet new social and environmental needs and expectations through their products.
• The earnings call is a critical forum for disclosing an organization’s equity story to the capital markets and information disclosed in the earnings call can really move markets.

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