More than 30 trillion dollars has poured into global sustainable investments, up 64 per cent since 2014, according to a discussion paper by McKinsey and Company which seeks to describe how approaches to environmental, social, and governance (ESG) concerns build business value.
According to the management consultancy, paying attention to ESG does not compromise returns. In fact, it adds to growth.
While there is a growing recognition of the relationship between a strong ESG culture and success, the reasons for this can seem opaque.
However, McKinsey and Co now says ESG links to cashflow in five important ways:
- facilitating top-line growth;
- reducing costs;
- minimising regulatory and legal interventions;
- increasing employee productivity;
- optimising investment and capital expenditures.
McKinsey has tracked the impact of sustainability on business for well over a decade. And now, it seems, business is finally catching on.
Last year, for instance, the Business Round Table, under the leadership of JP Morgan’s Jamie Dimon, abandoned a long-held view that shareholders’ interests should always come first. Indeed its old mantra, stated explicitly, was that “The paramount duty of management and of boards of directors is to the corporation’s stockholders. The interests of other stakeholders are relevant as a derivative of the duty to stockholders.”