Vallis: ESG Criteria: What are they, and how do they impact trading and supply chains?

Vallis Report I Nov 21

Introduction

Environmental, Social, and Governance criteria, nowadays commonly referred to as ESGs, are based on the concept of “conscious or responsible” investment which was first introduced during the 1960s. ESG grew out of investment philosophies that focused on areas such as sustainability and, thereafter, socially responsible investing.[i]Early efforts of measuring companies against ESG criteria were excluding companies from portfolios largely due to concerns regarding environmental, social, or governance practices. A more specific example of this would be investors excluding stocks or entire industries from their portfolios based on specific business activities such as tobacco production or their involvement in the South African apartheid regime.[ii]Today, the drive for ethical considerations and alignment with sustainable practices has grown exponentially, with many investors now looking to incorporate ESGs into investment processes alongside traditional financial analysis which aligns with theUnited Nations’ 17 Sustainable Development Goals (SDGs).[iii]As such, ESGs have often been regarded as the corporate response to the SDGs, with national governments using the SDG rankings or principles to guide tax and regulation policies. Whilst there is currently no ‘set standard’ for measuring companies’ compliance with ESGs, there are nevertheless some accreditation models which highlight the positive steps companies and corporations are making in terms of the SDG goals and ESG criteria.

In addition to providing a more detailed account of what the ESGs are, the report explores the potential impact each of the ESGs could have on Africa and the Middle East and more specifically illustrates the implications for trade and businesses in these countries. Leading from this, it will identify under which ESG Vallis could offer potentially may be able to offer its services.

Read full report here