The adoption of ESG practices is vital for evaluating any company, according to a new report.
Our Fellowers are already well aware of our commitment to ESG values. We repeatedly discussed and insisted on the meaning and importance of these acronyms in the investment world. This time, we are here to focus on how ESG practices affect the value of a company. According to an FTI Consulting report, three out of ten institutional investors believe that the implementation of good ESG practices justifies an increase in a company’s valuation of 50% or more.
Since 2020, the investment ecosystem has extensively turned green. According to this consultancy firm, ESG fund assets under management have doubled in just one year (up to April 2021). Moreover, Bank of America stresses that one-third of global equities entered ESG funds in 2021.
Therefore, in the face of a sustainable business and investment landscape, FTI gathers several conclusions that will shape the present and future of global ESG trends, including:
- ESG value: all institutional investors surveyed for the report agree on the positive and direct link that ties ESG practices to a higher company valuation. Of those participating, 34% believe that these practices can justify an increase of more than 50% in a company’s value.
- A new investor profile: nine out of ten investors became interested in understanding climate change issues last year, the report states. However, these investors believe that corporate entities act more effectively in other ESG areas than those related to the environment.7
- Transparency veil: three out of four institutional investors demand more information about companies’ sustainability strategies to invest in. This figure represents an increase of 13% compared to last year.
- The threat of divestment: 81% of investors consider divesting from companies with poor ESG scores. This threat may be enough for such companies to improve their ESG strategies, according to 84% of respondents.
Fellow Funders is fully aware of the growing value of ESG practices, both from a business and investor perspective. That is why we published our Sustainability White Paper this year. However, our commitment to ESG values cannot remain in theory but needs to translate into our day-to-day business. For that reason, our analysts take a close look, in terms of their presence and depth, at these ESG stocks, valued by our Fair Value division.
