April 21, 2023

Is ESG tied to stronger growth?; 16 Euro Zone banks fall short of climate demands; may face penalties; G7 Ministers urge implementation of mandatory climate disclosure; Net Zero Leadership Summit in Ottawa; Earth Day is coming

Is ESG Tied to Stronger Growth?

A new study by global management consultancy Bain & Company and sustainability ratings provider EcoVadis reveals a positive correlation between ESG activities and financial performance. The study evaluated 100,000 companies, 80% of which were private, to determine the impact of ESG activities on both ESG outcomes and financial performance. The study found that companies with ESG activities, particularly in areas such as diversity, equity and inclusion, renewable energy, sustainable supply chains, and workplace initiatives, experienced faster revenue growth and stronger margins.

Invert Insights:

Companies with strong ESG practices tend to be better positioned to identify and manage emerging risks, such as climate change. When a company has strong environmental practices it can mitigate risks associated with environmental regulations. Likewise, companies with strong social practices, such as diversity and inclusion initiatives, may be better positioned to attract and retain top talent, and to build stronger relationships with customers and communities. In today’s business landscape, employees are increasingly seeking to work for companies committed to sustainability. In response, companies can leverage platforms such as Invert’s Climate Action Platform to engage their employees in climate action and broaden their sustainability programs. 

The European Central Bank (ECB): 16 Euro Zone Banks Fall Short of Climate Demands and May Face Penalties 

The European Central Bank has announced that around 15% of the euro zone banks it evaluated need to provide more details about their vulnerability to climate risk or may face penalties. The banks failed to identify material exposures, explain the impact on their business and outline their mitigation strategies. The ECB mentioned that further improvements must be made and that they will take appropriate supervisory measures to ensure compliance or they may face penalties including publicly naming the banks, higher capital requirements, or fines equal to 5% of daily turnover until the issue is resolved.

Invert Insights:

As banks improve their climate transparency, those businesses seeking financing can expect increased pressures to be more transparent about their own carbon footprint and to transition to cleaner energy sources and technologies. 

G7 Ministers Urge Implementation of Mandatory Climate Disclosure

At the G7 Ministers' Meeting on Climate, Energy and Environment, the G7 ministers called for mandatory climate-related financial disclosures to accelerate sustainable finance and achieve global climate goals. The ministers discussed various commitments and initiatives to achieve goals, including accelerating the clean energy transition to net zero by 2050, halting and reversing biodiversity loss by 2030, and eliminating plastic pollution by 2040. The inclusion of a commitment to accelerate the phase-out of unabated fossil fuels in the communique was a significant energy transition milestone, though some nations' efforts to introduce a 2030 goal to phase out coal-fired power still needs to be met, including Canada's.

Invert Insights:

Implementing mandatory climate disclosures can provide consistent information for market participants, driving decision-making toward investment in sustainable and low-carbon activities while also helping companies to manage risks associated with climate change. Taking climate action now to ensure mitigation and adaptation can lead to long-term cost savings, health benefits, and ensure the resiliency of our ecosystems.

Net Zero Leadership Summit in Ottawa 

On April 19, a group of prominent leaders, experts and innovators gathered to address the challenges and opportunities of achieving a net-zero economy. Providing a unique opportunity to join forces on the urgent task of scaling sustainable practices and fostering resilient communities.

Earth Day is Coming

April 22, 2023, is Earth Day, a day to recognize the importance of conservation and biodiversity. This year marks the first time the day will be celebrated within the UN’s Decade on Ecosystem Restoration focused on reversing the degradation of ecosystems to secure a healthy planet for us all.

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