ESG is all about upholding or improving a company’s capacity to produce value over the long term. So, ESG is about companies offering good risk-adjusted returns by generating value for all stakeholders, be it employees, shareholders, customers and the community. There would be both traditional financial indicators like earnings and cash flow.
And also non-financial components like human capital, social capital and governance. It’s said that ESG investments can make a difference without compromising performance with higher potential returns, boost shareholder value and the ability to outperform competitors. But, is there a terrain marked by performance shifts, skepticism towards greenwashing and a sense of pragmatism that may contrast the ideals of ESG? It seems like performance has shaped ESG attitudes.
In 2021, it was said that nearly 67% of investors claimed to consider ESG factors when making investment decisions. When returns are inconsistent, it may be that commitment falters. And the energy sector may present a complex ESG puzzle. It may be that ensuring energy security for a country is considered good governance and a social necessity.
Does this mean a reliance on fossil fuels, when it comes to achieving this goal? And if so, does that complicate the ESG narrative? Mining is deemed to be harmful for the environment. But, can extracting raw materials, like copper, cobalt, lithium and nickel to establish a low-carbon future complicate the equation? Because these raw materials are said to be used to make electric cars and renewable energy technology. According to the International Energy Agency, the total global nickel production yearly is about 2.8 million tonnes. It’s estimated that by 2040, the EV and battery storage sector would require about 3.3 million tonnes.
