ESG is far from a new concept, but it has taken off in popularity over the past few years. And rightly so: ESG has the potential to reduce costs, boost stock performance, and increase customer and employee loyalty — among other things.
As more companies get on board with ESG, new statistics are emerging every day that show how it is shaping the business landscape.
Looking at these statistics, one thing is clear: ESG is a critical must-do for all companies, regardless of size or industry.
But don’t take our word for it. We’ve rounded up a list of 25 ESG statistics that show just how powerful and important this concept is.
ESG adoption: Which companies are doing ESG?
One major takeaway from the research is the breadth of companies that are embracing ESG. Once considered a niche market for the largest global companies, ESG has moved into the mainstream and been adopted by smaller, privately-owned companies as well.
1. As of 2020, 88% of publicly traded companies, 79% of venture and private equity-backed companies, and 67% of privately-owned companies had ESG initiatives in place. [NAVEX Global]
2. More than three out of four (77%) small and mid-caps have a formal purpose statement related to ESG. [Quoted Companies Alliance]
3. Nearly one out of five (18.5%) small and mid-caps are using ESG standards, such as the UN SDG, GRI, or SASB. [Quoted Companies Alliance]
4. More than one in four S&P 500 companies that conducted earnings calls for Q4 2020 cited “ESG”. This represents a 63% increase in ESG mentions from the previous quarter, and the highest number of ESG mentions in the last ten years. [FactSet]
5. More than 200 companies have signed The Climate Pledge, a pact to reach the Paris Agreement goal of net zero carbon 10 years early. [The Climate Pledge]
Value of ESG: Is ESG worth it?
Embarking on a formal ESG journey is no small feat. Done right, it requires a significant investment of money and resources. However, the following statistics prove that these efforts will pay off in the long run.
6. 80% of the world’s largest companies are reporting exposure to physical or market transition risks associated with climate change [S&P Global Market Intelligence]
7. Climate-related weather events are expected to cost businesses $1.3 trillionby 2026 [CDP]
8. 76% of consumers say they will stop buying from companies that treat the environment, employees, or the community in which they operate poorly [PwC]
9. Putting the United Nations Sustainable Development Goals (SDGs) — the leading ESG framework for large companies — at the center of the world’s economic strategy could unlock $12 trillion a year in opportunities and generate 380 million jobs. [Business and Sustainable Development Commission]
10. 53% of revenues of the 500 largest US companies and 49% of revenues of the 1,200 largest global companies come from business activities that support SDGs [S&P Global]
11. 27% of revenues of the 500 largest US companies and 31% of revenues generated of the 1,200 largest global companies come from activities aligned with the EU Taxonomy for Sustainable Activities [S&P Global]
12. ESG strategies can affect operating profits by as much as 60% [McKinsey]
13. Organizations with the highest employee satisfaction had ESG scores 14% higher than the global average, likely due to their strong environmental performance [Marsh & McLennan]
14. 88% of consumers will be more loyal to a company that supports social or environmental issues [Cone Communications]
ESG investing: How investors are driving ESG
All these benefits aside, one major reason ESG has taken off in the last few years has to do with investors. Investors have become increasingly interested in ESG issues. In response, many major banks and investing firms — including JP Morgan, Wells Fargo, and Blackrock — have incorporated ESG investing criteria into their processes and products.
15. ESG propositions had a positive impact on equity returns 63% of the time [McKinsey]
16. ESG-mandated assets could make up half of all professionally managed investments by 2025, totaling $35 trillion. [Deloitte]
17. Green, social, and sustainability bonds — designed to funnel investments into ESG projects — reached a new global record of over $700 billion in issuances in 2021, almost double the 2019 total of $358 billion. [Climate Bonds Initiative]
18. 85% of asset managers say ESG is a high priority for their companies, but 64% were concerned about a lack of transparency and corporate disclosure on firms’ ESG activities [Index Industry Association]
19. 72% of European asset owners that receive ESG-related reports from asset managers would prefer to standardize reports across managers, yet only 18% are currently able to do so. [Clearwater Analytics]
ESG mandates: How many countries are mandating ESG?
Another reason for the rapid growth of ESG has to do with global mandates. The research shows that more countries are requiring companies to disclose their ESG performance in one format or another.
20. The number of ESG reporting provisions issued by governmental bodies has grown 74% over the last four years. [Carrots and Sticks]
21. Today there are nearly 400 reporting provisions in the 80 countries included in the study. [Carrots and Sticks]
ESG challenges: What are the barriers to ESG adoption?
In spite of all this, the research shows that companies are falling short of their ESG targets. A lack of data availability and, more specifically, siloed data keeps companies from reaching their goals.
22. 71% of CEOs believe it is their personal responsibility to ensure that the organization’s ESG policies reflect the values of their customers [KPMG]
23. Only 50% of companies believe their company performs very effectively against environment metrics. [NAVEX Global]
24. Worse, only 39% believe their company performs well for governance, and 37% for social issues. [NAVEX Global]
25. Nearly a quarter (24%) of companies say that corporate silos are a barrier to ESG progress. [PwC]
Summary
With more than nine out of ten publicly traded companies adopting ESG, it’s one of the biggest trends in the business world today. ESG offers numerous benefits, including reduced business risks, better financial performance, and higher returns on investment. And, given the fact ESG reporting mandates have grown by 74% in the last four years, it’s safe to say that ESG is here to stay. However, much work is still needed to ensure that companies are ready for the ESG revolution.
https://www.perillon.com/blog/author/john-niemoller
