Reynir in Real Deals: We’ve reached a tipping point for ESG in private equity

In an article published by Real Deals, Reynir Indahl tells us how to use ESG to create more value and reduce risk. Summas’ founder and managing partner say it’s time to ask whether your business is part of the problems facing the world or part of the solution.

As countries all over the world battle the second wave of Covid-19, business resilience is front of mind for organizations everywhere. Reynir argues that companies were under increasing pressure to consider a range of external threats in how they run their operations, even before the pandemic.

It is becoming increasingly clear to businesses and investors, that they must pay more than lip service to the “externalities” that could impact growth, provide opportunities to outperform, and even dictate their very existence, in the coming years.

The current investment climate is as volatile and uncertain as any time since the second world war, as the global economic growth is slowing, national debt-to-GDP ratios are increasing, while climate change, population growth, and an overuse of the planet’s natural resources have huge implications for society and the environment. While digitalization is driving innovation, it also reinforces inequality through disrupting employment and ways of working.

This might paint a bleak picture and indeed, for businesses, ignoring these macro trends could have serious consequences, through regulation, employee pressure, reducing customer demand and reputational damage – all of which are magnified in the age of media proliferation and information sharing.

The author argues that it is in finding solutions to these problems, that the biggest opportunities lie, and even in companies that don’t operate in obviously ‘ESG friendly’ industries, incorporating ESG thinking can be a significant driver of innovation and growth. All businesses create additional costs and benefits to society and the environment, which vary depending on the activities they’re involved in.

(…) for any organisation, maximising the good and minimising the bad can bring advantages for corporate competitiveness, operating performance and long-term value, by influencing employee motivation, customer and stakeholder commitment, attracting talent and reducing waste and inefficiencies.

Reynir’s key point is that ESG can’t simply be bolted on alongside the main profit drivers, but instead must be an integral part of how a business creates competitive advantage and drives value. Read the whole article in Real Deals.

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