4 Reasons Why ESG Ratings Must Be Core Of A Modern Brand

If your firm hasn’t yet embraced ESG investing—a method of investing that meets defined criteria in Environmental, Social, and Governance categories—you could be missing out on a key lever of growth. Brands with high ESG ratings have not only proven to make a stronger impact and grow faster than less sustainable firms, but also outperformed those with poorer ratings

However, implementing ESG ratings to your overall brand strategy doesn’t happen overnight. It takes a consistent plan to effectively weave those values into your core purpose to align to both consumers and investors. But the benefits far outweigh the risks. Read on as we explain four reasons your company should be embracing ESG ratings now to get ahead of the competition. 

Reason #1: ESG is Integral to Your Firm’s Purpose

In the PE/VC world, the industry is changing faster than ever, leading firms to continually test new ways to surpass the competition. 

To get a jump-start, firms can embrace an ESG culture as part of their core purpose by leveraging those values as a guiding light in any decision-making moment—especially during times of crisis or uncertainty.  

Reason #2: ESG Priorities Drive Supply Chain Decisions

With sustainability at the core of ESG agendas, transparency in how you source and buy is key in proving to consumers that you are sustainably conscious. 

By taking the time to thoroughly understand how direct suppliers (and the several downstream vendors they’re connected to) source materials and operate, firms can select partners that help them achieve a fully sustainable supply chain. While this can be a research-intensive undertaking, the long-term benefits not only include ESG-met goals, but can also help lower cost, conserve resources, and earned consumer trust.  

Reason #3: ESG is Integral to the Employer Brand Strategy

By making ESG a core part of your brand strategy, companies can serve a three-fold audience of investors, consumers, and employees. To start, consumers want to do business with, and buy products from, companies that reflect their core values, especially in relation to positive environmental, social, and governance values. Whatsmore, investors want to be sure their finances are going toward activities that don’t pose a reputational risk

With Millennial and Gen Z talent expected to make up over two thirds of the workforce by 2030, companies that integrate ESG standards as a core function of their business better align to these generation’s sustainability values—a critical piece to growing (and maintaining) employee retention and satisfaction rates in today’s competitive talent market. 

Reason #4: ESG Focus Amplifies Value to Shareholders

Shareholders invest for the long term, and benefit more from sustainable value accrued over a few years versus short-term quarterly revenue growth. ESG performance is directly related to higher economic value added (EVA) margins, while higher stock volatility is linked with poor ESG performance. Because of this, brands that reflect the core values of key stakeholders experience stronger overall performance and provide more value.

…But Not All ESG Ratings are Created Equal 

As more and more firms make the shift toward socially responsible investing, it’s important to keep in mind that the biggest challenge the industry faces is how to accurately and consistently measure environmental and social impact. Because the ratings are measured differently across agencies, ESG ratings can be an inconsistent measure of performance. 

From discrepancies in quantitative data points, to qualitative “greenwashing” (which aims to put a positive spin on otherwise mundane data), ESG rating agencies often take self-reported data from brands and add in their own information to form a somewhat biased report. As such, the majority of these reports are unique to the brand, making it difficult to compare them to another company, so a standard, objective rating system is nearly impossible to achieve. 

The three main factors driving ESG ratings divergence include:

  • Scope Divergence: Occurs when ratings are based on different attributes (ie: carbon emissions and labor practices being measured by one agency and not another) 
  • Measurement Divergence: Occurs when agencies compare the same attributes but use different raw data (ie: both agencies compare carbon emissions and labor practices, but use different data criteria, resulting in entirely different interpretations)
  • Measurement Divergence: Occurs when agencies weigh factors of their rating system differently (ie: Agency 1 considers carbon emissions a majority factor, while agency 2 places greater weight on labor practices)

Finally, there’s a “rater effect,” meaning if a firm receives a high score in one category (ie: carbon emissions) they’ll be more likely to receive high scores in all other categories, thus boosting their rating regardless of scores in other areas being evaluated. 

Future-Proof Your Portfolio with Altvia

As systems and processes evolve to standardize ESG ratings, PE/VCs can get a head start by integrating non-financial data with traditional data to build a comprehensive report across firm and industry performance. By providing transparency throughout these reports, and running thorough due diligence, firms can provide shareholders with a full picture analysis of efforts and impacts as they relate to ESG.

To begin building your ESG investment strategy and future-proof your portfolio, the first step is compiling all of your data in a centralized platform. Altvia can help. To learn how,, reach out to our team to start a conversation.

A traditional crm was built for general ‘customer’ scenarios

Software platforms have made the world a better place by making work a better place. Indeed the world is better off when people enjoy their jobs even marginally more, and workplace applications on big CRM platforms like Salesforce.com have done that and much more.

But the potential that platforms like these offer presents diminishing returns: once the platform provider has engineered too many industry specific components into its platform, its usefulness for other industries begins to be threatened, and with that so do the usefulness of the component tools built into the platform.

So it is with the CRM category that Salesforce.com has defined: it is generic enough to work for many industries, and yet still offers the potential for others to round off the edges and nail more vertically-oriented and extremely tailored software solutions.

Private capital markets are actually a great demonstration of this dynamic. Where generic CRM platforms simplify — appropriately so — to assume there’s a business, a customer, a sale, and service of that customer, there are a few industry-specific pieces that are missing.

Take for example, that investors become customers by investing through legal entities the GP raises. It’s a subtle but important nuance that just doesn’t make sense at a platform-as-a-service level (because it’s overly complicated for a simple one-time sale that many industries require), but which can easily be added without 10 years or software engineering. Once provided, the rest of the platform’s components become tremendously powerful again and you’re set to take over the world.

As a traditional CRM in our pillars methodology, these nuances must be present to properly account for investors in these legal entities, potential target companies and which are owned by these entities, the context of all interactions with these parties (as well as the appropriate overlap, ie co-investments), and how you’re arriving at finding these opportunities on both sides of the equation, such that you’re able to piece together what’s effective and what’s not. Not just because we say so, but because these are the very relationships and data that are key to the motivation behind a CRM in any industry.

It’s critical, too, that the valuable publicly-available information that helps to enrich CRM systems and save users painful steps of entering it themselves is fully-integrated at the platform level.

Again, look no further than the 3,000+ pre-built integrations that Salesforce.com — the creator of the CRM platform concept — has at a platform level to do so, and which only exists by way of holding just short of overly-specifying certain industry workflows that would present challenges to properly integrate.

Stakeholder reporting and communication (investor relations) draws on a range of datasets

The traditional “customer service” model of CRM systems once again makes overly-simplified assumptions about the customer relationship when applied to private capital markets.

In fifteen years I personally have yet to hear the terms “warranty” or “service call” in this market because it’s just not the same. But make no mistake, as uncomfortable as it may be to say aloud, customer service is more important now than ever and it’s constantly happening; the industry is, after all, considered to be a financial “service”.

As it turns out, that service is primarily information-based — it’s driven by data and takes the form of reports and analysis that drive decisions, and then end up again in investor-facing reports and analysis.

The foundational elements of a private capital markets CRM must be built such that they accommodate this data (like we discussed above), but so too that it can accommodate additional supporting data that investors (customers!) need in the context of service.

Oftentimes this supporting data — financial metrics and time-based values, for example — is believed not to meet the traditional definition of CRM and the natural thought is “well, better do this in Excel!”.

While I happen to believe Excel is still the greatest software application ever built, its introduction to this value chain we’ve discussed herein actually creates the problem many firms suffer from: key data needed to provide customer service (again: effectively the entirety of a firm’s reports and analysis) is now in disparate systems and detached.

Both of those dynamics are important and distinct: not only is this supplemental data disparate, but when brought together there is no logical association that can be made between the two data sets.

Allow me, then, to make the point very simply: not only can this financial and time-based value data (you may be thinking about is as “portfolio monitoring” or “accounting”) be a part of a CRM, it is arguably the most important part of a CRM because it’s at the core of what providing service to the customer entails — information that comes out of data!

Firms need a digital method to engage stakeholders (ie investor portals)

Investor portals are not new; in fact, for many of us — including myself — they conjure up horrifying nightmares in which we’re aimlessly guessing at folders to find the newest document we need.

So in lies the opportunity: not only have the portals we’ve come to hate not simplified the process of acquiring information, they’ve failed to create an entirely new experience that is “customer service” driven.

To be fair, this is not a B2C market where you’d be long out of business for not having focused on customer service and thus the customer’s technology-driven experience. But don’t expect to be around too much longer if you aren’t thinking about this shift.

Today’s institutional investors increasingly expect this same consumer-like experience, and a massive opportunity is being missed by not providing it. It’s not about providing them the experience they desire; it’s more about the ability to measure engagement that is had in return.

Put simply: what’s keeping the market from providing this experience is the availability of the information that’s required to create the service that provides the experience.

If you’ve hung in this long, you know that by focusing on your CRM, you have the data that’s required to manage the customer relationship and the technology-driven experience through which that information is shared to create a differentiated and opportunistic customer experience.