Environment, Social and Governance (ESG) is all a rage today. Boards and companies are rushing to embrace it, investors are showcasing their green credentials, and what’s more, governments are committing to meeting ever stringent targets, with a bit more seriousness, I hope, than their promise to be more fiscally prudent in future. But the ducks don’t seem to line up. Companies expect regulators to tell them what to do. Investors hope that they will be given digestible data to integrate with their stock selection. And regulators hope that if they mandate targets in line with global commitments, companies will find the secret sauce.
Companies and boards must prepare to face the messy reality of ESG. Regulations, no doubt, will standardize ESG disclosures and provide investors and stakeholders with comparable information. But this will not be the end, as multiple requirements and guidance will continue to flow and expectations build up to step beyond the regulatory ambit.
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