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02 november 2021

REPORT | Common grounds on the 'S' of ESG

Our second sustainability webinar in the series was on the 1st of November: The 'S' of ESG. Michael Collins (chair of the IRSG ESG workstream), Kees Gootjes (business and human rights advisor at ABN AMRO) and Margarita Shevtsova (senior portfolio manager at ACTIAM) shared reflections on the current state and upcoming headways of the social consideration in the financial sector. Led by Eszter Vitorino (senior advisor impact and sustainable investment at Kempen Capital Management) they debated in a panel discussion.

Building consensus

"Consensus is needed on which social issues the financial industry requires to prioritize", Michael highlighted. He emphasized that the EU may pave the wave, but it shall not dictate the agenda. Two main challenges must be tackled down the road: there needs to be agreement on specific metrics and wide-spread global standards must emerge. 

Financial institutions play an influential role which comes with great responsibility to engage with policymakers on the screening of the proper implementation across the value chain of those standards.

From risk to contribution 

Kees defended that a focus on human rights can fundamentally change asset allocation and investment decisions. He encourages to move from an exclusive risk lens to a contribution perspective via boosting activities that benefit essential human needs across the horizontal stakeholders spectrum of clients, workers and communities.

Adding 'S' on the investment decision matrix

Margarita underlined the long-lasting impact of social issues on share price. To do so, she pointed out a myriad of examples from bad press to boycott campaigns connected to social concerns. The resulting reputational damage highlights how social issues also have a direct impact on the financial performance of firms.

Engagement versus divestment: the stick - carrot dilemma

The 3 speakers discussed about the tension between divesting from a company with social underperformance versus staying engaged and committed to help the investee to change from the inside. This dilemma is intertwined, the experts agreed, with the governmental approach to the 'S', which needs to balance punishments (social tax on imports was brainstormed as example) with carrots in the form of public disbursements supporting social endeavors that gradually pushes the S-bar upwards.

More information

This sustainability webinar was the second in the series. Would you like to respond, or should you have any questions? We would be pleased to hear from you. Please feel welcome to e-mail Stephen Ivan aan den Toorn, DUFAS policy advisor sustainability.

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