As the race to solve climate change picks up pace, businesses that don’t start considering the environment may risk losing funding.
Investors are increasingly looking at key metrics to assess progress across environmental, social, and governance (ESG) factors in making their investment decisions.
Medium-sized businesses, in particular, are falling behind, according to research by Addleshaw Goddard, and the gap between them and larger companies is only set to become more pronounced over the next four years.
The study found that financiers intend to turn off the funding tap to companies by 2025 if they fail to provide a carbon transition strategy. This is all across the board, but the real estate and healthcare industries are particularly at risk.
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A considerable part of the issue is that mid-sized companies are much less likely to take a strategic approach to ESG.
Fifty-five percent of very large organisations say that ESG considerations are at the heart of their business strategy and shape everything they do, compared to 43% of medium-sized organisations. And almost half of medium-sized organisations admit to performing the minimum level of ESG reporting for legal and regulatory compliance, compared to 23% of very large organisations.
Just last month, investors managing over $130 trillion in assets have written to more than 10,000 companies calling on them to supply environmental data to the non-profit disclosure platform CDP.
More than 3000 of those companies to get the letter will receive it for the first time, while more than 4000 will get a repeat request after failing to respond last year.
“While many companies are disclosing, setting targets and taking action across their own business operations and value chains, there is a surprisingly large part of the market still to take the vital first step of disclosure,” CDP Chief Executive Paul Simpson said.
“These companies are becoming increasingly out of touch with reality, investors, and public opinion.”
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