Investors are increasingly putting an onus on incorporating environmental, social and governance (ESG) issues into their investment decisions, as there is mounting evidence that ESG performance is directly linked to company revenues and costs. Civil society organisations, governments, and private sector investors are looking for more information on how firms can effectively manage ESG issues facing private enterprises. The Sustainable Development Goals (SDGs) meanwhile provide a starting point, a common framework to anchor ESG considerations to decision making.
ESG issues for private enterprise include:
Typical ESG issues in forestry and agriculture sector
Many investor groups – like pension funds, NGOs and associations – have historically had objectives other than monetary profits, driving them to invest in firms that incorporate ESG considerations. And many investors view low ESG-standards as a weakness that exposes them to various risks – like strikes and negative publicity – that reduce future profits.
Among the many ESG issues related to environmental risk, climate change is the most pressing, given its global scale, immediate scope, and hazardous impacts. ESG considerations generally present a range of risks and also opportunities, all of which depend upon a company’s supply chain and overall exposure to environmental change. A company’s structure and scale is also a key factor determining its risk profile. A large conglomerate, for instance, may have a wholly different set of ESG considerations than a small and medium enterprise (SME), while consumer-facing brands may be less directly exposed to retail-related risk than would be business-to-business enterprises.
Indufor works with a range of private enterprises and investors addressing all manner of ESG-related issues. We are intimately familiar with several ESG frameworks (e.g. IFC and PRI), and have many years of experience developing tailor-made ESG solutions to address our clients’ needs.
We support private companies in the following areas:
- Measuring their performance across a suite of ESG metrics
- Make adjustments to strategy and operations where needed
- Publicly report on progress against specific ESG goals
- Conduct DD of suppliers’ compliance with ESG metrics
- Assessing ESG and value creation
In addition, we support investors in incorporating ESG in investment analysis and decision-making processes.
Examples of our projects relating to ESG assessments include:
- Forest loan due diligence for the European Investment Bank in China
- Social and environmental due diligence for a major pulp and paper company supply chain in Brazil
- Several due diligence exercises with global impact investors, for example, European climate and sustainability-oriented funds
- Several stakeholder saliency assessments for major pulp and paper companies in Latin America.