Having a positive impact on society is more than just making the world a better place; it also makes good business sense. Investors are closely watching as consumers demand that companies take a stand and act on critical societal issues. From climate changes to diversity and inclusion, investors are increasingly considering how companies support communities, society and the planet, as part of their investment thesis.
Q1 2021 hedge fund letters, conferences and more
Historically, environmental and social matters were a part of a company's philanthropic support of its community, and today, according to the KPMG Survey of Sustainability Reporting, 80% of large and mid-cap companies around the world have ESG strategies and reporting, which have now evolved into a core pillar on which shareholders, consumers, and other stakeholders evaluate a company. Corporations are expected to have goals to make a significant, positive societal impact. As consumers seek increasing accountability from companies, Environment, Social, and Governance (ESG) factors are also increasingly being taken into consideration by investors.
Consumers Care
The value of investing in socially conscious companies started to change when research demonstrated that consumers were choosing to purchase from these companies with a social mission, resulting in positive company performance. And the interest continues to grow.
The survey found that more than three-quarters of American consumers (78%) “want companies to address important social justice issues.” Many of those respondents (63%) reported that are “hopeful businesses will take the lead to drive social and environmental change moving forward, in the absence of government regulation.” And even more (87%) said “will purchase a product because a company advocated for an issue they cared about.”
Investors Care
Investors are scrutinizing not only a company's financial performance, but its commitment to vital societal issues as well. BlackRock's Larry Fink has opined to companies the importance of creating long-term sustainable value for shareholders, including the existential crisis of climate change. With assets of more than $7 trillion, BlackRock has strongly affirmed that environmental and social priorities are the cornerstone of its investment approach. As a result, many money managers are using ESG factors for investment decisions – especially commitments to reducing climate change.
In fact, between 2018 and 2020, total U.S.-domiciled sustainably invested assets under management, both institutional and retail, grew 42%, to $17.1 trillion, up from $12. This growth is driven by multiple factors, including the global spotlight on climate change and corporate responsibility to lead the change.
Since the development of the Task Force on Climate-Related Financial Disclosures (TCFD) in 2017, companies have been providing more effective climate-related disclosures and the financial impact on their business, allowing investors and other stakeholders to make more informed decisions. Engaging with these stakeholders on ESG initiatives increases transparency, helps manage expectations and provides a future path for these programs. Many companies are increasing their transparency by providing third-party analysis of critical industries. The Conference Board found that, for a company, one of the most significant benefits of obtaining external assurance is the credibility and trust it can help build with stakeholders.
As executives, if you haven't already, you will be asked about your company's commitment to sustainability, social issues and governance and the interest continues to grow. As public companies seek to appeal to a shifting investor base, how a company ranks on its ESG scorecard matters, as roughly one in four dollars in the U.S. is now invested through an ESG lense. In fact, we recently shared our ESG scorecard. As leaders, we have the opportunity to build value for shareholders that embraces an excellent return to society in addition to a good return on investment.
Article by by Alex Amezquita, CFO, Herbalife Nutrition
About Alex Amezquita
As Chief Financial Officer, Alex Amezquita is responsible for corporate financial functions at the highest level, including the company’s financial reporting, accounting, tax, and treasury functions.
Prior to joining Herbalife Nutrition in 2017 as the senior vice president of finance, strategy and investor relations, Amezquita was senior vice president at Moelis and Company, a leading global investment bank, where he advised Fortune 500 companies on mergers and acquisitions, corporate governance, capital markets strategy and investor relations. Beginning in 2012, Amezquita worked extensively as a financial advisor to Herbalife Nutrition on key strategic and financial initiatives while at Moelis.
Amezquita brings over 20 years of experience to Herbalife Nutrition from his finance and engineering background. He commenced his investment banking career on Wall Street advising Fortune 100 companies while at Merrill Lynch and Centerview Partners. He began his professional career in the aerospace & defense and technology sectors. During this time, Amezquita worked as both a lead design engineer and consultant to a broad spectrum of industry leaders ranging from Northrop Grumman to Cisco Systems.
Amezquita holds an MBA in finance from the Wharton School at the University of Pennsylvania, and a Master and Bachelor of Science degree in electrical and computer engineering from Carnegie Mellon University.
