ESG Standards: Comparing Apples to Pears

In a world with more than 2000 initiatives reporting on non-financial data and 400 frameworks in place relating to environmental, social and governance (‘ESG’) standards, transparency is a “disinfectant”, according to Arlene McCarthy OBE, an executive director at AMC Strategy.

“There are too many standards,” McCarthy said in a podcast hosted by Jason Mitchell, co-head of responsible investment at Man Group. “Investors are being asked to compare apples with pears.”

The financial services industry is at a crossroads, whereby it will either take the lead on the response to global heating, or see its business model eroded by the existential risks posed by climate change, according to McCarthy. Still, the industry is “well-placed to finance sustainability and has the power to make an enormous impact,” she said.

McCarthy also explores the place of time within the dialogue surrounding responsible investment. “In politics,” she said, “you have to be persistent, but you also have to be patient.” What companies have difficulty with, McCarthy said, is “short-termism”. The greatest challenge when it comes to bridging the gap between policy goals and corporate behaviour is persuading management teams to broaden the time horizons they use to judge their performance. “In the end,” she said, “when a board sits down to make decisions, the bottom line is about profit margins, about keeping the company afloat. We need to help them understand that sustainability isn’t just good, it’s also good business.”

Comments may have been edited and condensed for editorial purposes.

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