Environmental, Social and Corporate Governance
January 31, 2023 2023-02-28 6:40Environmental, Social and Corporate Governance
Environmental, Social and Corporate Governance
admin As the previous generation gradually passes on the baton to the millennials, asset managers are increasingly being assessed on the values they uphold, the ethics they promote and the wider role they have to play in improving the society in which they live in. Asset managers have a major role to play in helping to solve some of the most pressing problems the world currently faces. As a link between the providers of funding and those who need it, they are in a privileged position. Even other more traditional providers of debt capital such as banks must demonstrate their capacities to develop meaningful investment solutions that meet today’s challenges and help finance sustainable economic growth.
ESG considerations are integrated throughout investment processes through universe screening, investment selection, portfolio construction and engagement. Managers are also committed to continuously increasing transparency of reporting to clients on ESG impacts and on active ownership activity.
Long-term benefits to client portfolios can come from well-run companies with ethical business practices. Both publicly traded and privately held businesses that seek funding are required to issue ESG reports, which are increasingly scraped to improve the understanding of businesses by Natural Language Processing models.
The long-term driver of change in markets, nations, industries, and businesses will be sustainability, which will open up chances for profitable investment. When voting at shareholder or board meetings, companies like Blackrock use ESG scores and invest client money in ESG-weighted ETFs.
Even within the Sub-Saharan African private equity space, managers must demonstrate a commitment to ESG or impact investment goals in order to secure money from traditional investors. Fund managers are required to be involved and accountable shareholders who consider ESG factors when casting their votes in order to promote positive change.
Sustainability in investing goes beyond policy documents.
The majority of Mauritius’ non-financial listed companies are patrimonial, and the country has little experience using the stock markets to replace conventional bank debt financing. The local institutional investment base has a reputation for being quite passive and lacking in sophistication. The corporate debt market has primarily been a large borrower’s market as a result of excessive liquidity and banks’ desperate search for yields.
Due to highly indebted corporations’ potential desire to sell assets or share investment risks on projects, Mauritius’ private equity sector may experience increased growth. Private Mauritian businesses may need to rely more on foreign investors given the low ratio of gross national savings to GDP (and high levels of governmental and private debt).
Without the will, is there a way?
For many years, there have been significant entry hurdles and moral hazard due to the rentier economy and political patronage system. Numerous economic sectors have continually received safety nets from policymakers in the form of subsidies, cheap bailouts, and benefits. ESG scores now have no effect on the effective corporate tax rates that businesses pay.
Last but not least, if the government wants to foster a more diverse and socially conscious society in Mauritius, it can maybe start by improving the governance structures and ESG objectives of the country’s numerous public majority-owned firms. For instance, LUX and New Mauritius Hotels have provided the public with more information on their bailouts than the MIC has. Mauritius Telecom and the State Bank of Mauritius are two examples of organizations that still have a long way to go when it comes to improving corporate disclosure policies and governance structures.
ESG is the way of the future, but it’s unclear if Mauritian policymakers will take this path or not.
Source: https://www.pluriconseil.com/environmental-social-and-corporate-governance/
By Sameer Sharma
