Measuring ESG Benefits to Companies, Communities, and Funds
At Altvia, we believe that running our business in a responsible, beneficial manner requires serving the needs of all our stakeholders—including clients, partners, employees, and the communities where we operate.
While the “impact investing” movement has long recognized the positive effects that investment projects can have on society, the private equity industry as a whole is growing increasingly focused on concepts like environmental, social, and governance (ESG) and corporate responsibility.
ESG Investing: Doing Good Is Good Business
Following sustainable management trends that began in Europe, and the example of leaders like Patagonia founder Yvon Chouinard, American businesses are recognizing that “doing good” is good business. They’re also discovering that companies that aspire to be socially beneficial usually are.
Structuring investments under the guidance of ESG principles creates true win-win situations. While firms always conduct a risk management analysis and consider whether a deal is going to provide long-term ESG benefits for a community and its environment, increasingly, funds and institutional investors are including ESG characteristics in how they evaluate investments at both the company and fund levels.
But there are lingering questions: How do we characterize those guidelines and how do we quantify being responsible?
The True Measure of Success with ESG
The goal for ESG investing isn’t avoiding controversial sectors like firearm manufacturers or strip-mining operations. Instead, it’s being able to demonstrate the beneficial impact that a fund’s investments have on the larger community while being profitable for direct stakeholders.
Measuring these results requires new metrics and analytics. But smaller companies, historically, are unaccustomed to recording and tracking these figures. That’s typically because they lack the resources, time, or knowledge to do so.
Even if a company has ESG investing data, there’s no standard to serve as a reliable yardstick for success. There’s also no format in place to report ESG stats efficiently. That’s something the industry is working on and a challenge where advanced private equity technologies such as Altvia’s can play a crucial reporting and communications role.
European funds and asset managers have already made great progress in these fields. Today, it’s clear that ESG investing is here to stay.