CHAPTER 08 ESG and Climate Change in the Shadow of COVID-19: “E,” “S” & G Are Here to Stay
Our Take: Lessons Learned from COVID-19 and What to Expect in the 2020s
Perhaps one of the key lessons learned from the impact of COVID-19 is the speed at which seemingly remote risks can turn into existential threats for businesses. The main difference between COVID-19 and many ESG factors, like climate change, is that the latter is foreseeable, and opportunities exist to respond to and mitigate the impact of a wide range of ESG-related risks. COVID-19 has also reinforced and brought new prominence to the importance, both to shareholders and stakeholders, of the “S” in ESG. The crucial role that is played by traditional social issues – such as human capital management and labour relations – has now been expanded by a broader concern over the indirect impacts of an issuer’s operations (such as those taking place further up in the supply chain), and by concerns over the manner in which the issuer is, and is perceived to be, satisfying both economic and ethical expectations. In fact, more than ever, considering the 2020 ESG-related themes that appear to dominate the public debate and having in place solid ESG policies and practices are widely accepted as being core to issuers’ long-term sustainability, resilience and financial viability.
Despite the immediate focus on economic survival in the wake of COVID-19, the pandemic has not abated shareholder or stakeholder expectations relating to ESG and Climate Disclosure; nor has it muted calls to prepare for and implement plans and strategies that facilitate responsible and sustainable business practices for the long term. In this context, companies should consider taking the following steps to position themselves to meet and exceed stakeholder expectations regarding ESG factors: 1 Focus on the TCFD. The TCFD framework is emerging as the current leading industry standard for Climate Disclosure and is recommended as a guide for issuers in preparing for future disclosure. 197 While some issuers are already utilizing aspects of the framework, others may find it prudent, if not essential, to begin their shift to align with the TCFD recommendations. 198
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