{"id":17567,"date":"2021-12-10T08:55:30","date_gmt":"2021-12-10T07:55:30","guid":{"rendered":"https:\/\/naider.com\/naiderlab\/el-compromiso-ambiental-y-social-condiciona-de-forma-creciente-el-acceso-de-las-empresas-a-financiacion\/"},"modified":"2023-04-24T13:37:37","modified_gmt":"2023-04-24T11:37:37","slug":"the-environmental-and-social-commitment-increasingly-conditions-the-access-of-companies-to-financing","status":"publish","type":"naiderlab","link":"https:\/\/naider.com\/en\/naiderlab\/knowledge\/articles\/the-environmental-and-social-commitment-increasingly-conditions-the-access-of-companies-to-financing\/","title":{"rendered":"THE ENVIRONMENTAL AND SOCIAL COMMITMENT INCREASINGLY CONDITIONS THE ACCESS OF COMPANIES TO FINANCING"},"content":{"rendered":"\n
\"\"<\/figure>\n\n\n\n

Original article published by Confebask (link<\/ a>)<\/p>\n\n\n\n

It is undeniable the growing social concern around the negative externalities that business activity often generates and, in particular, the impacts from both an environmental and social point of view.<\/p>\n\n\n\n

The fabric\nbusiness has gradually begun to feel directly alluded to,\npushed many times by questions of the image that projects to society and\nalso due to the growing regulation in these areas. However, it has now\na new element has entered the equation that seems, this time, to have made\njump some more alarm bells in companies: the incorporation of criteria\nsocial and environmental factors in access to business financing. are what\nis known as ESG criteria<\/strong> (or ESG, in its\nacronym in English): criteria Environmental,\nSocial and Corporate Governance<\/strong>, which already\nthey have a significant presence in guiding investments. <\/p>\n\n\n\n

The ESG criteria refer to the consideration of environmental, social and corporate governance aspects when investing in a company. Despite not being a completely new concept, since it has some history, in recent years they have become the benchmark for socially responsible investment (SRI) <\/strong>. The ESG criteria have three complementary dimensions: <\/p>\n\n\n\n

The environmental dimension <\/strong>reflects the direct or indirect impact that the activity of companies has on the environment, such as CO2 emissions (climate change) or the use of resources and materials. <\/p>\n\n\n\n

The social dimension <\/strong>refers to the impact that business activity has on society. In other words, impacts on diversity, human rights, the inclusion of different groups or working conditions, among others, are measured. <\/p>\n\n\n\n

The governance dimension <\/strong>refers to the corporate governance of companies. In this case, aspects related to practices, control environments and procedures of companies to make decisions, comply with regulations or meet the needs of stakeholders, among others, are analyzed. <\/p>\n\n\n\n

The truth is\nthat there is some ambiguity about what is considered a sustainable investment or\nthat has taken ESG criteria into account. This makes what is more than necessary\ncalls a harmonized \u201ctaxonomy\u201d that helps to have homogeneous criteria\nand a common language when talking about sustainable investments or criteria\nASG. In this sense, initiatives such as the commission\nUnion <\/a>or the Task<\/a> Force<\/a>on<\/a>Climate- related<\/a>Financial<\/a>Disclosure< \/a>are required\nkey to avoid falling into the dreaded green<\/em> <\/em>washing<\/em> <\/em>and above all\nso that investors and society in general can count on criteria\nclear and comparable when making decisions.<\/p>\n\n\n\n

The\nnegative externalities that economic activity generates for the moment are not\nare reflected in the valuations of the companies, unless there is any\nregulation in this regard that translates into costs or impacts on the account of\nresults. To begin with, this type of externalities, and especially those\nrelated to the social sphere and the governance of companies are not being\nmeasuring. Assuming that standardized methodologies were available,\ninternational and comparable for the valorization of natural capital and\nsocial, the value of companies as we know it today would change\nsignificantly. <\/p>\n\n\n\n

This factor does not\nhas, however, been an obstacle for regulators and growing\ndemands among investors to report and take into account ESG factors in\nthe decision-making of the companies, have made the impacts on the\nmarket are already a reality.<\/p>\n\n\n\n

At an international level, Europe has the longest track record in incorporating ESG criteria when allocating capital, counting in 2018 with 48.8% of sustainable investments out of the total assets managed.<\/p>\n\n\n\n

\"\"

Figure 1. Proportion of sustainable investments in relation to total assets under management. Source: GSIA. <\/figcaption><\/figure><\/div>\n\n\n\n

Although in relative terms this figure has been reduced compared to 2014 (58.8%), the total funds managed with ESG criteria have continued to grow at a notable rate (11% growth for the period 2016-2018 ). <\/p>\n\n\n\n

\"\"

Figure 2. Evolution of assets managed with ESG criteria a global scale. Source: GSIA. <\/figcaption><\/figure><\/div>\n\n\n\n

In economic powerhouses such as Canada and Australia\/New Zealand it also seems that the number of conscientious investors who analyze factors beyond economic-financial aspects has gained presence. In fact, in 2018 the percentage of sustainable investments out of the total assets managed already exceeded the European figures.<\/p>\n\n\n\n

There are more and more studies that suggest that investment with ESG criteria reports some higher returns<\/a>, that is, companies that introduce ESG criteria in their day-to-day activities show better performance in the long term. According to the company McKinsey & Company<\/a>, there are five key aspects with which companies improve their competitiveness when integrating ESG criteria: <\/p>\n\n\n\n

1.Opportunities for growth: <\/strong>Access to resources after improving relations with the community and institutional relations. <\/p>\n\n\n\n

2.Cost reduction: <\/strong>Less use of resources such as energy or water. <\/p>\n\n\n\n

3.Regulation: <\/strong>Greater strategic freedom due to being well positioned in the face of new environmental and social regulations. <\/p>\n\n\n\n

4.Productivity improvement: <\/strong>Improvement of employee productivity and motivation. In addition, this will translate into less worker turnover, taking advantage of the investment in training for a longer time. <\/p>\n\n\n\n

5.Investment and asset optimization: <\/strong>improved returns on investment by better allocating capital over the long term. For example, more sustainable and durable production plants and work equipment. <\/p>\n\n\n\n

Maybe it’s\ntoo early to scientifically endorse this whole set of assumptions and\nstatements and it will be necessary to strengthen this line of research but more\nbeyond the support or evidence in the scientific literature, the greater awareness\nby investors and regulators is already a reality and this has\nmarket effects that translate into pressures\nby conscientious shareholders <\/a>or rules to comply\nwith the Paris agreements<\/a>.<\/p>\n\n\n\n

What is\nIt is clear that a large part of investors and financial institutions see value\nin the long term in companies that contribute positively to society. <\/p>\n\n\n\n

All this\ntrend may seem to only concern large companies which have\nwith external investors. But the truth is that the background behind ESG criteria <\/strong>is much more\nwide, and is marking the financial and regulatory market for\nany type of company<\/strong>. <\/p>\n\n\n\n

Going back to the\nsituation in Europe, the European financial system revolves around its extensive\nbank network. The European Central Bank <\/em>(ECB),\nin charge of ensuring the security of the banks it supervises, presses each time with greater insistence\nthat are clearer and more precise when measuring their exposure to change\nclimate<\/a>. This to the\nwill undoubtedly affect its capital requirements, favoring a\nchanging their financing strategies to companies. <\/p>\n\n\n\n

A change in strategy that will tend to reward less polluting companies. Those that do not ride the wave of the climate and socially just transition will end up paying higher interest rates for access to financing. That is if they are even allowed to access financing. <\/strong><\/p>\n\n\n\n

Therefore, the incorporation of ESG criteria refers to all types of companies<\/strong>, regardless of their sector or size. Those who want to position themselves in time and begin to integrate ESG criteria into their policies and daily activity should take several points into account: <\/p>\n\n\n\n

Will to decarbonise. <\/strong>Europe seeks to be carbon neutral by 2050. Without a doubt, this objective concerns any type of company and will imply changes ranging from the energy model to the organizational model. <\/p>\n\n\n\n

Diagnose.<\/strong> In addition to the desire to decarbonise, it is necessary to know the situation of those environmental, social and corporate governance aspects that may be more material. The SDGs provide a good framework for including these aspects. <\/p>\n\n\n\n

Establish short, medium and long-term goals<\/strong>. For example, many of the environmental objectives established by European organizations cover a very broad time horizon. Establish roadmaps or set actions that cover a closer time horizon and contribute to progress. <\/p>\n\n\n\n

Increase the presence of ESG criteria in the governance of the company. <\/strong>That is, that it has a presence when making decisions in the different government bodies and that growth plans, investments or decisions <\/p>\n\n\n\n

Measure and report on a recurring basis <\/strong>the progress made. <\/p>\n\n\n\n

Communicate<\/strong>, both externally and internally, the work being done. This will help increase the involvement of the people who are part of the company. <\/p>\n\n\n\n

Of course,\nthe level of ambition of these activities will vary according to the capacities\nof each company and its commitment to society but not having started to\nworking in terms of ecological, social and governance transition already has direct impacts on the\ncompetitiveness of some companies that see limited or directly closed the\naccess to sources of financing for their activity and investments.<\/p>\n\n\n\n

Jokin Echevarria
Economist, MSc Business & Management<\/strong><\/p>\n\n\n\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

Original article published by Confebask (link) It is undeniable the growing social concern around the negative externalities that business activity often generates and, in particular, the impacts from both an environmental and social point of view. The fabric business has gradually begun to feel directly alluded to, pushed many times by questions of the image…<\/p>\n","protected":false},"author":1,"featured_media":15752,"template":"","meta":{"_kad_blocks_custom_css":"","_kad_blocks_head_custom_js":"","_kad_blocks_body_custom_js":"","_kad_blocks_footer_custom_js":"","_kad_post_transparent":"","_kad_post_title":"","_kad_post_layout":"","_kad_post_sidebar_id":"","_kad_post_content_style":"","_kad_post_vertical_padding":"","_kad_post_feature":"","_kad_post_feature_position":"","_kad_post_header":false,"_kad_post_footer":false,"_kad_post_classname":""},"hashtag-lab":[],"naiderlab_tag":[157],"naiderlab_category":[51],"ppma_author":[198],"class_list":["post-17567","naiderlab","type-naiderlab","status-publish","has-post-thumbnail","hentry","naiderlab_tag-local-and-territorial-economic-promotion","naiderlab_category-articles"],"taxonomy_info":{"naiderlab_tag":[{"value":157,"label":"Local and territorial economic promotion"}],"naiderlab_category":[{"value":51,"label":"Articles"}]},"featured_image_src_large":["https:\/\/naider.com\/wp-content\/uploads\/2022\/12\/Criterios-ESG_con-texto-1024x764-1.jpg",1024,764,false],"author_info":{"display_name":"Naider","author_link":"https:\/\/naider.com\/en\/author\/sirope-naid3r\/"},"comment_info":"","_links":{"self":[{"href":"https:\/\/naider.com\/en\/wp-json\/wp\/v2\/naiderlab\/17567","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naider.com\/en\/wp-json\/wp\/v2\/naiderlab"}],"about":[{"href":"https:\/\/naider.com\/en\/wp-json\/wp\/v2\/types\/naiderlab"}],"author":[{"embeddable":true,"href":"https:\/\/naider.com\/en\/wp-json\/wp\/v2\/users\/1"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/naider.com\/en\/wp-json\/wp\/v2\/media\/15752"}],"wp:attachment":[{"href":"https:\/\/naider.com\/en\/wp-json\/wp\/v2\/media?parent=17567"}],"wp:term":[{"taxonomy":"hashtag-lab","embeddable":true,"href":"https:\/\/naider.com\/en\/wp-json\/wp\/v2\/hashtag-lab?post=17567"},{"taxonomy":"naiderlab_tag","embeddable":true,"href":"https:\/\/naider.com\/en\/wp-json\/wp\/v2\/naiderlab_tag?post=17567"},{"taxonomy":"naiderlab_category","embeddable":true,"href":"https:\/\/naider.com\/en\/wp-json\/wp\/v2\/naiderlab_category?post=17567"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/naider.com\/en\/wp-json\/wp\/v2\/ppma_author?post=17567"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}