Environmental, Social and Corporate Governance (ESG) assessment is currently a very popular tool in the international business environment. This will allow for a more objective risk assessment when investing in Russian companies, believes the RANEPA expert.
He is approached to obtain information about a potential contractor, creditor or business entity in order to decide whether to invest in this entrepreneurial activity. For this reason, an ESG rating is most often perceived as a credit rating.
However, in fact, it is rather a tool for assessing the degree of corporate social responsibility, because its purpose is to determine how ecological the production of a given company is, how it interacts with contractors, suppliers, consumers, society and the state, whether it participates in programs supporting citizens, whether it helps the communes where it operates, whether it cares about the quality of goods and how it raises the social level of its employees, and also how efficiently the company’s management system is built, whether the rights and interests of investors and shareholders are respected, not internal and external fraud and corruption, to what extent the level of remuneration corresponds to the needs of staff.
“At first glance, these indicators only indirectly allow us to assess business efficiency, but this is not the case. In the modern world, where the environmental and social agenda is important and desirable, these indicators indicate the degree of public and state trust in this company. If the degree of trust in the company is high, then it has every chance to exist on the market for a long time, because its products will be in demand and will be preferred by the buyer, because when choosing the same type of goods, we always prefer the manufacturer we respect and trust. And if at the same time it participates in various environmental programs and social assistance programs, then such a company will receive additional direct and indirect financial support from the state. To sum up, this minimizes the risk for such a company, increases its competitiveness and enables it to receive loans on preferential terms,” said Sergei Reshetnyak, an expert of the North Caucasian Institute, a branch of RANEPA.
According to the expert, the institution of corporate social responsibility was not generally desirable in our country, but in recent years the situation has begun to change. The creation of a unified all-Russian ESG rating will allow us to more or less objectively assess our companies, which will have a positive impact both on the domestic market and when interacting with partners from friendly G20 countries.
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