Responsible Investment

Boards need to articulate the business case for ESG

January 19, 2012
Erika Karp (all rights reserved)

http://www.youtube.com/watch?v=7bkeRo8zKLM
Often boards are too distant from the ‘action’ of a company to be able to ask the right questions – those that will lead an organization to a fuller integration of ESG. “A board member would have to be very knowledgeable about exactly how a business is operating to be able to identify opportunities…so maybe there is a disconnect somewhere along the way.”

She believes the board should ask questions that enable them to gain insight into “not just what the business lines are, but how they are being managed. What are the incentive structures from the very top to the very bottom when it comes to executing the business? What are the opportunities for risk, what are the opportunities for growth?”

Clarity in making the business case for sustainably-focused management of a company is what is lacking for many boards, she says. In order for boards to do this, good case studies are needed, which willprove that such ESG issues as diversity – “potentially a huge driver of creativity, innovation, entrepreneurship and profits” – can lead to a company’s success.

“I don’t think the business case for ESG has been articulated well, because if you take each of the pieces – environmental, social and governance – there’s a business case to be made wherever you sit in the capital markets ecosystem,” she says.

In her day-to-day business Ms. Karp sees plenty of practical evidence of the value of ESG by looking at UBS’s many thousands of clients.“From my standpoint, those companies that are most proactively transparent in issues of material importance to investors are those that are performing optimally,” she says.

References

This video interview was recorded in New York City on 13 December 2011 during the ESG USA 2011 Conference “Investing for a Sustainable Economy,” organized by the Responsible Investor in association with Bloomberg.

This article may be reproduced according to our terms of use with attribution (and link, if online) to www.tias.edu. To be cited as: “Boards need to articulate the business case for ESG”, Erika Karp, www.tias.edu, January 19, 2012.

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Audio transcript (mp3)

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