“ESG criteria make it possible to assess the extent to which sustainable development and long-term issues are taken into account in the strategy of economic players (companies, local authorities, etc.).”
Source: Autorité des Marchés Financiers (AMF)
What are the ESG criteria?
Ils sont basés sur 3 piliers :
Environment
- Waste recycling
- Energy and water consumption
- CO2 emissions
- Sustainable prevention of risks related to industrial disasters (oil spills, soil contamination, etc.)
Social
- Quality of social dialogue
- Employment of disabled people
- Improvement of working conditions
- Employee training
- Combating inequality
- Respect for employees' rights
- But also quality of the subcontracting chain
Governance
- Transparency of information
- and of executive remuneration
- Fight against corruption
- Women on boards of directors
What are the objectives of ESG criteria?
Il y a 3 objectifs à l’utilisation des critères ESG :
⇒ Enable investors to study the responsibility of a company before including it in their portfolio
⇒ Request an assessment to find out where you stand
⇒ Measuring corporate social responsibility
Few numbers...
billion$ Is the amount invested in ESG funds in 2021 worldwide, compared to 285 billion in 2019.
is the number of sustainable funds in the world at the end of 2021.
%
of these funds are in Europe.
%
of CFOs of large groups have been participating in the "Green Taxonomy" project since 2020. The project has been partially implemented since 1st January 2022.
D’où viennent ces critères ? Que sont-ils devenus aujourd’hui ?
1995 : John Elkington created the concept of the "three Ps" ("people, planet, profit").
2015 : The Energy Transition for Green Growth Act was adopted in France, requiring large companies to publish a non-financial report.
2017 : A Non Financial Reporting Directive (NFRD) has been adopted by the European Commission. It requires large companies with more than 500 employees to publish a non-financial report.
2022 : The European Commission proposed a new directive, the Corporate Sustainability Reporting (CSR), to replace the NFRD. It will require listed SMEs, and all large companies (whether listed or not), to publish an even more detailed non-financial report.
...But how, overall, will this impact the finance departments?
The impact of this CSR approach on financial management
Post-pandémie, il y a (enfin) eu une prise de conscience de la part des entreprises concernant les enjeux environnementaux, mais aussi sociaux. En effet, 85% des directeurs financiers interrogés pensent que la crise sanitaire a été un propulseur de l’intégration des enjeux ESG dans la stratégie d’entreprise.
Mais cet éveil est aussi causé par la demande accrue des investisseurs à récupérer les données ESG des entreprises pour lesquelles ils investissent. Entre 2009 et 2019, il y a eu une augmentation de 69 points de la demande des investisseurs à la lecture de rapports ESG, d’après une étude publiée par Gartner en 2021.
The role of the CFO in an ESG strategy
Be the "guardian of non-financial reporting" (Daf-mag.fr)
En effet, plus la note d’une entreprise sur ses facteurs ESG et de responsabilité sociale est élevée, plus son coût du capital, tant en termes de dette que de capitaux propres, est faible.Ensure that ESG criteria are properly maintained
This means preparing your company for scrutiny by all stakeholders: investors, regulators and the public.
How does this impact finance departments?
Non seulement une bonne note au rapport ESG permet d’éviter le pire légalement, mais cela permet aussi, d’après plusieurs études, de toucher à la croissance, aux bénéfices et à la performance financière d’une entreprise. Mais aussi à la notoriété auprès des investisseurs. Few examples:
Growth
Unilever reports 50% faster growth for its eco-friendly brands than for its other brands.
Profits
Microsoft reported in 2015 that it had saved more than $10 million a year through its carbon neutrality model. This money saved has helped several associations in the fight against climate change.
Financial performance
Les entreprises qui répondent au “Carbon Disclosure Project” affichent un rendement des capitaux propres supérieur de 67% à celui de ceux qui n’y répondent pas. Ainsi, les organisations qui participent au CDP ont identifié 53 milliards de dollars d’économies grâce au processus de déclaration.
Reputation of the company among investors
As a reminder, only 85% of investors in 2019 take ESG criteria into account in their strategic decisions.
According to Deloitte, le directeur financier détient “4 rôles” nécessaires à la bonne poursuite d’une stratégie ESG : le régisseur, l’opérateur, le stratège, et le catalyseur.
Written by Eléonore Berne, on 07/09/2022.
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