If you have read any business-related news or been involved in or around the financial services space recently, then you will have heard of ESG. At Traditum we are taking an authentic approach towards a sustainable future.
It is important to understand what is meant by the term ESG:
- ENVIRONMENT: factors referring to a company’s behaviour on environmental issues, such as resource depletions, climate change, waste and pollution.
- SOCIAL: factors which are related to a company’s treatment regarding people, workers and local communities, including health and safety issues.
- GOVERNANCE: factors referring to corporate policies and governance; including, tax strategy, corruption, structure, remuneration.
As we optimistically approach the latter end of the pandemic, there has been a wake up call for many policymakers and investors due to the short space of time it took for COVID-19 to impact global economies. The pandemic has highlighted the requirement for a different approach to investing, due to the comparisons being made between the vulnerabilities displayed by the COVID-19 pandemic, and the issues surrounding climate change.
Importance of ESG:
Would you invest in a company not making any effort in mitigating its impact on the environment? Would you place trust in a company with no regard for employee welfare or gender equality? It is highly likely that you will have just answered no to both of those questions – as most would. This helps to put ESG into perspective. When effectively reported on, the use of ESG metrics as a factor in investment decisions can be very useful, as these issues are not only a matter of ethics, but also have a clear impact on revenues. Due to this, investors are evaluating organisations not only upon their financial performance but also on the company’s non-financial factors, and how the organisation itself has identified and is managing these ‘ESG’ related risks and opportunities.
ESG in the PE space:
Considering that almost 99 percent of firms are small and medium-sized, as well as accounting for a large proportion of private sector revenues, it becomes very apparent that they have a critical role to play alongside the largest of corporates in moving towards a sustainable future. Given this, PE houses are in a unique position of having the opportunity to raise the discussion around ESG. Consistent engagement with board and management teams of a wide array of businesses allows us to discuss the most important topics with key decision makers. To maximise this opportunity and ensure a tangible difference is made, it is crucial that the principles are integrated into the day-to-day operations. By ensuring a company has a well implemented ESG impact framework and uses a consistent, common language, ESG can be effectively communicated and understood across all business lines, allowing organisations to authentically make changes and improve their ESG performance.
What are Traditum doing?
“At Novo Mundo, we see it as a top priority to integrate the principles of ESG through the entirety of our business. This is why we are working with Traditum in developing our innovative solution to the UK’s waste problem.”
– Mark Wilson, CEO, Novo Mundo
Traditum do not see the inclusion of ESG principles within our own practice as a box-ticking exercise. We see it as a way of adding value to both our own and our clients’ businesses. We are currently creating an integrated strategy, to ensure that we as a company fully understand the risks and opportunities regarding the ESG principles in the lead up to COP26 in November. Throughout this process, it has become apparent that we are looking to do more than just announce our commitment to ESG, but we are keen to prove it within our actions and decisions. This shall become apparent through our operations going forward as we look to continually work with forward thinking companies.