MergerMarket Forum: ESG and Corporate Strategy

ESG (Environmental, Social, and Governance) considerations have evolved significantly in the past year, driven by investor expectations and disclosure frameworks, as well as the real effects of ESG on climate change, social aspects, and governance. While Asian markets tend to view ESG from a compliance perspective, it is important for companies to recognize the many stakeholders involved, including investors, customers, employees, suppliers, communities, and bankers. It is also becoming increasingly critical for startups to prioritize ESG considerations from the beginning, as ESG is integral to business models and important to stakeholders and investors. The article delves into the key takeaways from the ESG and Corporate Strategy panel at the MergerMarket Forum in Singapore on 25 April 2023.

Panellists:

• Jana Jevcakova, Managing Director, Head of ESG International, Morrow Sodali
• Jeffery Tan, Group General Counsel; Chief Sustainability Officer; Director of Legal & Corporate Affairs and Company Secretary, Jardine Cycle & Carriage
• Tanah Sullivan, Group Head of Sustainability, GoTo
• Simon Segal, Director, MergerMarket Australia

Some key takeaways from the session are:

• Incorporating ESG (Environmental, Social, and Governance) considerations has become increasingly critical to business models and is of utmost importance to stakeholders and investors. Thus, startups should prioritize ESG considerations from the outset instead of viewing it as a compliance requirement. When setting up an ESG or sustainability function, it is essential to approach it from a practitioner perspective and determine what is relevant to each business line from environmental, social, and economic perspectives. ESG standards should be applied, and targets linked to ESG priority areas to ensure that every ESG operation has a financial impact on the company and becomes standard business practice.
• Sustainable reporting is evolving more rapidly than financial reporting, and it is necessary to go beyond simple disclosure and include ESG risks, opportunities, and impact in business strategies. Companies must avoid greenwashing, which can occur when aligning with UNSDGs, and instead rely on the GR ISB or ISSB framework, which can provide guidance for companies at various stages of their sustainability journey. Policymakers play a critical role in setting the direction and reinforcing these points.
• As sustainability reporting becomes increasingly important, accurate data is crucial to maintaining credibility. Regulators and stock exchanges are pushing for sustainability reporting, and third-party assurance of sustainability data is becoming more common. ESG is evolving rapidly, and practitioners need to stay up to date with changes and approach ESG from different perspectives, such as compliance, risk, and opportunity.
• ESG should not be a stand-alone approach but rather integrated into a company's existing operations and decision-making processes. The goal is to create a sustainable and profitable future by identifying and closing operational inefficiencies, which can generate financial returns for shareholders and other stakeholders. To achieve this, it is essential to align with international frameworks and adapt to the unique operating context of each company. Decarbonization targets can be tied to business plans and strategies, resulting in a sustainable and profitable future.
• Integrating ESG considerations into business decisions and operations is not only necessary to meet investor expectations but also to create value for stakeholders in the ecosystem. Companies need to set high standards for themselves, operate like world-class companies, and be accountable for meeting their ESG targets. More and more investors are emphasizing ESG, and companies that exhibit strong ESG performance are more likely to attract world-class investors to their cap table.
• The increasing demand for climate reports from venture capital and private equity investors for small businesses and startups demonstrates that ESG considerations are already penetrating the unlisted space. Companies that do not pay attention to ESG risks and opportunities, do not establish proper targets, or do not demonstrate how they plan to achieve them may be vulnerable to ESG attacks, which could cause disruptions and potential business challenges.

Watch the recording of the session here.