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ESG Data: A Strategic Indicator For Investors That Believe In Quality Of Investments | |
| Staff Writer |
Despite many investments taking a strong hit during the Covid-19 pandemic, there is enough data to show that ESG investments have been resilient despite the tough market conditions in the UAE whose commitment to a net zero circular economy is slowly and steadily bearing fruit.
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The Dubai Financial Market’s UAE Index for Environment, Social and Governance (ESG) also gives priority to ESG practices.
According to the Economist Intelligence Unit (EIU), the investor demographic is growing younger. Their data suggests that 76% of the younger investors cite that healthy ESG data is a determining factor when managing assets, which is a stark contrast to 37% for the older generation. The EIU has also reported “growing investor and consumer activism”, making it imperative for the ESG rating provider to first analyze the existing data and further make decisions around what data is used and how.
Some investors are values-based and want to align their investments to the same. According to Arabian Business, Investors are demanding information of higher quantity and quality, yet companies are not obligated to disclose ESG achievements. When they do, they often adopt globally fragmented standards, making objective comparisons difficult.
Evolution in business and society means that the impact of our decision is on not just a race but on the planet as a whole. Suffice to say that it is not enough to only look at financial profits anymore.
ESG data outlines a broad set of standards used to measure a company’s stewardship and sustainability. Today, many investors base their decisions on the commitment of a company as a leader for sustainable practices. An impactful ESG plan attracts better investors and capital.
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ESG data is a company’s impact on its human resource, clientele, the community and by extension the society.
The standards of transparency vary largely because the metrics can be difficult to assess. After all, how does one measure if the company of a thousand is keeping all its employees happy, or how does one define customer satisfaction? This allows ESG data analysers to set their own standard of matrices and then subsequently calculate ESG scores. Currently, Diligent, the market-leading provider, offers access to the world’s most extensive governance data set.
When the board of Directors are able to set an effectiveness score they will be able to identify potential discrepancies in diversity, governance, and executive pay.
Turning standards and guidelines into tangible, measurable activities and outcomes means that as one assimilates pivotal intelligence from available sources it is quintessential to measure and identify risks and red flags.
Companies are now expected to define their sustainability goals as part of their company’s vision and mission plan.