This is the recent newsletter from The middle Road. You can subscribe to the newsletter on LinkedIn – click link here.
Is Your Organization Ready for the ESG Revolution?
If not, it’s time to urgently consider making a transformative change. Environmental, Social, and Governance (ESG) factors are rapidly becoming a global force. With regulations evolving swiftly to promote low-carbon technologies, the risks associated with climate change—both physical and transitional—are too significant for companies, especially in advanced economies, to ignore. Companies in carbon-intensive sectors like energy and utilities are particularly compelled to adopt proactive strategies to avoid stranded assets.
Global ESG Leadership
The EU and UK have been at the forefront of implementing policies that emphasize green energy. China, currently the largest investor in low-carbon technologies, has seen its electric vehicle market surpass fossil fuel-driven vehicles on the road. Remarkably, despite being a developing country, China dominates the global manufacturing of renewable technologies and is on track to achieve carbon neutrality well before 2060. Today, most EU countries derive a significant portion of their energy from clean technologies, putting Europe on an accelerated path to achieve carbon neutrality before 2050. This global leadership, particularly from advanced countries and China, has propelled the proliferation of ESG across various sectors.
The Role of Data and Regulation in ESG
There is more data available on ESG now than ever before. While a universal sustainability standard is still lacking, the EU and UK have mandated the Corporate Sustainability Reporting Directive (CSRD) for companies. The EU Taxonomy has been instrumental in defining and categorizing sustainable activities. The US, the second-largest investor in low-carbon technologies after China, is also intensifying its efforts. The introduction of the Sustainable Finance Disclosure Regulation (SFDR) in the EU has been a game-changer. In India, sustainability disclosures are on the rise. The Business Responsibility and Sustainability Reporting (BRSR), aligned with global reporting standards like GRI and TCFD, requires the top 1,000 companies by market capitalization to report on ESG standards. In the EU and UK, Task Force on Climate Related Financial Disclosures (TCFD) reporting is now compulsory. * The Financial Stability Report has already highlighted climate change and biodiversity as systemic risks. The density of greenhouse gases is now at its highest in over 100,000 years, emphasizing the urgent need to reduce fossil fuel use. According to recent IPCC data, the demand for fossil fuels is projected to decrease within the next decade, with renewables playing a defining role in many countries. As a result, biodiversity is becoming increasingly important. Check out our biodiversity podcast here. One critical enabler for achieving Sustainable Development Goals (SDGs) is sustainable finance. Since the issuance of the first green bond by the European Investment Bank in 2007, sustainable bonds have diversified into various categories based on their use of proceeds. ESG investing has become so prominent that it is now a crucial parameter in investment management. Empirical evidence shows that higher ESG integration within investment strategies leads to lower costs of capital and better stock performance. While ESG integration enhances risk mitigation, asset managers are increasingly using it to generate alpha. Although there is no consensus that ESG integration will lead to better investment portfolio performance, clearly ESG integration is a necessity rather than tragedy. The Principles for Responsible Investment (PRI) is a market leader in promoting ESG integration among asset managers globally. The United Kingdom stands out as a leader in implementing best stewardship practices that enhance engagement-driven outcomes.
Materiality in ESG: A Dual Perspective
Strategies for incorporating ESG into investment management range from exclusionary strategies to positive, best-in-class, or norms-based approaches. ESG integration is now the largest strategy in responsible management. Stakeholder engagement and impact investment are other methods of promoting ESG. However, ESG integration is the most robust, employing both quantitative and fundamental-driven strategies. The emergence of financial materiality factors by the Sustainability Accounting Standards Board (SASB) has significantly driven fundamental investment strategies. For example, a material factor for energy companies would be their CO2 footprint. A horizontal material factor across companies will be human capital differing in its intensity depending on the type of business. The incorporation of double materiality is highly relevant rather than just understanding the impact of ESG factors on financial performance of companies. This requires understanding of how your organization or activity is underscoring ESG globally. Herein the concept of externality is of pivotal importance. This concept is adequately covered on The middle Road. Check out the microeconomics online course below.
ESG Investing Certificate from CFA Institute & New Offerings
To deepen your understanding of ESG integration into investment analysis, the CFA Institute offers a rigorous academic course on this topic. Nishant Malhotra, the solo founder of The Middle Road, was recently awarded a certificate in ESG Investing from the CFA Institute.
Explore top-notch CFA certification course through the link here.
The Middle Road is also offering highly curated workshops on this topic. Additionally, an affordable online mock test with detailed explanations of selected questions and a few add-ons will be available soon.
Contact Nishant at nishant@themiddleroad.org or reach out on WhatsApp at +91-9923266222 for the best discounts on accessing my startup’s content—subscriptions, standalone online courses, curated workshops, advertising, and consulting projects. Nishant, the topgun founder of The middle Road has a separate business consulting outfit, check the site here.
Movie and Music Recommendations
Finally, let’s talk about some excellent movies and music. Here are some must-watch international films:
- Memories of Murder (2003): A South Korean movie based on a true story of a serial killer. Shot in rustic locales in South Korea, this is one of the best movies known for its cinematic excellence with outstanding performances.
- Infernal Affairs (2002): A Hong Kong crime thriller that inspired the Hollywood remake, The Departed. Original, impactful, and brilliantly acted, one of the most defining movies in crime genre world wide. The movie inspired a sequel series, a must watch for anyone who loves classy movies.
- The Artist (2011): A French silent film that won the Oscar for Best Picture. A nostalgic tribute to the silent era of Hollywood, with remarkable chemistry between Jean Dujardin and Bérénice Bejo.
- Snatch (2000): A British crime comedy with an ensemble cast and intertwining storylines, reminiscent of Pulp Fiction directed by Quentin Tarantino. Directed by Guy Ritchie, it’s a masterpiece of storytelling.
Recently, Bruce Springsteen celebrated his 75th birthday. Springsteen remains a classic rock star whose music has influenced millions globally. His impact has been timeless. In country music, The Gambler by Kenny Rogers is a timeless classic. A highly recommended song is Springsteen by Eric Church, a tribute to Bruce Springsteen that stands out as one of the best in the country music genre. Another notable track by Eric Church is Give Me Back My Hometown. Check out the OST of Twisters featuring top gun artists like Luke Combs, Miranda Lambert, Lainey Wilson, Shania Twain, and others. It’s one of the best country music albums around. A recent add.
With Nishant Malhotra supporting green hair color for ESG.
For any errors or purchase of any products or service – kindly get in touch with nishant – nishant@themiddleroad.org. Kindly note the words “our” were removed as they were erroneously added, a couple of edits (investing), a couple of lines were removed. The sample question has been removed. *Above specific criteria.
#esg #themiddleroad_ #nishantmalhotra #art #movies #music #creativity #originality #podcasts