Firms would have a greater chance of succeeding in a post-coronavirus disease 2019 (Covid-19) world if they will adhere to “ethical investing,” according to the Asian Development Bank (ADB).
In an Asian Development Blog, ADB Economic Research and Regional Cooperation Department Principal Economist Jong Woo Kang said companies must think beyond profit after the pandemic.
Kang said companies should turn to environment, social and governance (ESG) investing which calls for channeling funds to renewable energy, telecommuting, distance learning, and telehealth.
“ESG funds can play a key role in the recovery from Covid-19 by making large-scale stimulus packages more inclusive and more focused on the environment,” said Kang.
“ESG investing to prompt positive social change, pursue sustainable and green growth, and enhance resilience against disasters, both health-related and natural, will receive renewed attention in the global financial market.”
Ethical investing, Kang said, is not only for corporations in rich countries but also in developing countries in the Philippines.
He said focus on environment and social responsibility will help developing countries achieve the Sustainable Development Goals (SDGs) and meet the Paris Accord on climate change.
The Philippines, according to a UN and ADB report, is still facing “last mile challenges” in meeting the SDGs.
The Philippines was deemed a “last miler” in achieving energy decarbonization and universal access to energy; promoting sustainable urban and peri-urban development; and securing the global environmental commons (See, “PHL still faces ‘last mile’ challenges in meeting SDGs–Unescap report,” in the BusinessMirror, May 22, 2020).
Kang also said developing countries will have a better chance of attracting foreign investors if companies and countries subscribe to ESG metrics in their businesses and operations.
“Foreign investors might start turning their backs on companies which lag on social and environmental consciousness. Reinforcing this trend is the reality that investors will become more wary of reputational risks if firms they’ve invested in don’t live up to desirable environmental and social norms,” he said.
In employing ethical investing, Kang said companies must recalibrate their business goals to encompass mid-to-long term environmental and social achievements beyond short-term earnings and profit targets.
He said they would also need to adopt an appropriate evaluation and reward mechanism to enhance corporate governance that safeguards workforce welfare, customer and supplier relationships, and engagement with the community.
Kang added that firms should strengthen accountability toward various stakeholders by employing accurate and transparent accounting and outreach programs to monitor their needs and priorities.
He said even international institutions, including multilateral development banks, will face growing expectations to proactively adopt ESG principles.
“Covid-19 has exposed humankind to so many challenges. A key lesson is the importance of sustainability, resilience and social responsibility of businesses and investments. After the pandemic, a duty of care for the natural environment, communities, and their employees, will be key metrics of business success,” he concluded.
ESG is consistent with the SDGs which emphasizes the triple bottomline—economy, social responsibility, and environment.
In the Philippines alone, UNDP earlier told BusinessMirror, that achieving the SDGs in the country could open $82 billion worth of market opportunities in food and agriculture, cities, energy and materials, and health. The SDGs can create as many as 4.4 million new jobs by 2030 (See, “Pandemic locks down PHL, UN in pursuit to achieve sustainable development goals,” in the BusinessMirror, April 2, 2020).