Not long ago, the letters “ESG” seemed like a secret code for a number of tree-hugging environmentalists. Today, sustainability is habitually on the agenda everywhere from the annual gathering at Davos, shareholder meetings of major companies, or private equity conferences.
Often, expressions of ambition in sustainability were not matched with the necessary action. Then, a little over a year ago the pandemic struck, and the world has since faced a unique challenge: a health crisis, which turned into an unprecedented socioeconomic challenge, one we will have to tackle for quite some time yet.
There has never been a time where environmental, social and governance (ESG) has been under the spotlight as much as today, as we confront a pandemic at the same time as fighting climate change, the undoubtedly greatest challenge of our generation.
After a year of Covid-related lockdowns, working from home, homeschooling and economic turmoil, three trends are becoming evident:
Firstly, organizations that have integrated environmental, social and governance considerations into their investment decisions and portfolio seem to be weathering the severe storm better than those who have not. They execute sound occupational health and safety protocols, apply inclusive human resource policies, identify and manage new or exacerbated environmental and social matters adequately. Academic evidence suggests a positive correlation between ESG performance and financial returns, in particular over time.
Secondly, digitalization. The sudden need to switch to agile and remote working has put the focus on the need for digital, efficient and remotely accessible data management. ESG data is increasingly part of what governments, regulatory agencies and investors request from companies and financial institutions, and digital data management is elementary to cater to those requirements.
Thirdly, an increasing need for access to finance, in a context where investors are requesting sustainability related data from everyone they consider investing in. They want to understand the ESG risks, opportunities and capacities before investing their funds, see robust environmental and social management systems and adherence to ESG reporting standards.
The European Bank for Reconstruction and Development (EBRD), which counts the United States of America and Greece among its shareholders, is actively supporting Greek companies and financial institutions to embrace those trends and integrate ESG into their core operations.
We support Greece’s ambitious plans to transition to a greener energy matrix, for example through our €18 million investment in Terna Energy’s green bond. We are providing stability support throughout the pandemic, as with last year’s €160 million loan to the Public Power Corporation (PPC) to ensure the stability of the energy sector and support decarbonization.
A case study to identify social issues in Greek non-performing loan portfolios is serving us to step up responsible investment strategies for NPL investments. We supported the Greek privatization process by designing a state-of-the-art digital ESG app measuring E&S performance data for assets managed by Greece’s privatization fund HRADF.
Where EBRD funds go, its ESG standards go, shaping the way business is done and capital markets operate, making our partners more resilient and ready for the future.