Gambling on Green

Chapter 3The Partnership between Investors and Corporations

The evolution of ESG as an investment focus has increased engagement between many investors and the firms in their portfolios. Investors increasingly view themselves as partners working with firms—sometimes voluntarily and sometimes under duress—to incorporate sustainable practices into business models, meet industry innovation challenges, and generate revenue. These corporations and investors work together in pursuit of five main objectives:

1. Opportunities gained from meeting and even surpassing evolving consumer expectations, rather than seeing these trends as merely onerous requirements (and only meeting the bare minimum)
2. Mitigation of risks through compliance with established regulations (such as environmental, human rights, and ethics), as well as addressing ESG issues without forced regulation
3. Lowering “cost of capital” by managing reputational damage that may result from scandals such as environmental contamination, worker injuries, corruption, or litigation; managing these elements may lead to lower interest rates for borrowed funds as there is a perception of reduced risk for lenders
4. Increasing revenues by producing climate-friendly and socially beneficial products that increase market share; consumers reward responsible companies with loyalty and increased consumption
5. Reducing operational costs through increased efficiencies, such as more renewable forms of energy and materials, resulting in long-term reduction ...