Environmental, Social, and Governance (ESG) standards have received a lot of attention in recent years, especially due to the growing awareness of their competitive advantage. Consequently, ESG is now being adopted in the financial landscape, and methods for driving ESG activities in financial institutions are being explored. As ESG factors become more important to regulators, investors, and analysts on a global scale, financial bodies identify the need to recognize the economic opportunity embedded in the ESG journey.

In an effort to highlight the importance of the same, Whiteshield – a global public policy and strategy advisory firm – presented a report on May 25, 2022, in the Swiss mountain village of Davos, alongside the annual meeting of the World Economic Forum, bringing together government and international financial institutions.

Whiteshield outlined a strategy for companies and regulators looking to navigate the ESG landscape with a focus on financial institutions. The report indicated the importance of ESG for the financial sector, given the central role of the sector in the overall economy, and how investors and financial analysts are paying close attention to the ESG behaviour of banks and other financial organizations. This is even more significant on a global scale, as the UK, Northern and Central Europe are driving strong ESG Governance, while the Middle East is catching up on Social and Governance tangents, whereas still working on the Environmental dimension. Similar ESG expectations are on the rise in more mature markets, with constant review in terms of perception.

Antonio Somma, Partner and Director at Whiteshield said: “The private sector is deeply entangled in the geopolitical landscape, actively working to address the economic fallout, meet humanitarian needs, and alleviate mounting pressure on global energy and food security. We truly believe that corporate responsibility is evolving, and that environmental, social, and governance standards and metrics are more important than ever, as companies assess global challenges, including meeting net-zero commitments which are now more critical than ever. We expect that emerging business opportunities based on ESG products and services will increasingly dominate the scene in the years to come.”

The report further highlighted how the ESG financing and investment market is expected to exceed USD 50 trillion by 2025, along with the rise of green finance and ‘green bonds’ in the market in recent years. It is understood that ESG efforts have a potentially larger impact when implemented synergically, with good stewardship in the environmental, social, and governance spheres positively defining and reinforcing how companies and countries interact with their stakeholders. Corporate financial results are likely to improve when the above factors are effectively integrated into their strategies.

Sustainable investments expert Tanja Havemann, founder, and director of Clarmondial and director of the Food Securities Fund, stated: “the rise of ESG and impact investing presents exciting opportunities for investors, companies, communities and governments. Harnessing these opportunities requires proactive and innovative approaches informed by technical knowledge of the underlying social, environmental and governance issues and new partnerships, including for blended finance.”

Jean-Louis Laurent Josi, Chief Executive Officer of Oman Insurance Company said: “Markets around the world have long struggled to price the risks and opportunities associated with several common social and environmental issues, including climate change and resource constraints. While ensuring resilience and driving towards progress is crucial, we recognize that a coherent, comprehensive system of corporate disclosure is required to achieve this, reaffirming the significance of ESG standards in our operations.”

Fadi Farra, Manging Partner of Whiteshield said: “ESG is now a fundamental pillar across all public policies and should be taken as granted for companies to act on.”

It is expected that the full impact of ESG on finance, citizens, and other business sectors will take time to emerge. Whiteshield understands the significance of ESG standards and its impact on the financial sector, as companies will continue to develop more ESG-based business opportunities, and communities can expect more environment-friendly products and services. This will certainly result in better business outcomes, more equitable treatment of stakeholders, and a more sustainable future.