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Goldman Sachs: 'If You Ignore Sustainability, You're Going To Be Worth Less'

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At a time when so many businesses have global growth ambitions, an emphasis on sustainability and non-financial issues could give a company the edge when it comes to attracting investors and gaining long-term commercial advantages, the chairman of Goldman Sachs' Asia Pacific region has said.

“As a company, if you ignore sustainability, you’re going to be worth less,” Tim Freshwater told a conference in Guilin, southwest China, explaining that data related to environmental, social and governance (ESG) is becoming a bigger factor when investors screen businesses.

“Companies have to make sure they have the data, and that they are ahead of the game. This has to be part of their business plan,” he said.

Indeed, according to a new report by CFA Institute, a global association of investment professionals, 63 percent of portfolio managers and research analysts interviewed said they take wider information, such as ESG, into account because it helps them better manage investment risk.

Of those polled, 44 percent said they now demand ESG data.

“The world is changing fast and corporations and financial institutions need to change with it,” Freshwater said. “These issues are getting more and more important.”

Freshwater, who is also on the board of the Hong Kong stock exchange, highlighted the global investment firm KKR’s Green Portfolio Program, which delivers both financial and environmental impact.

A separate study by YouGov recently showed that 86 percent of respondents in Hong Kong believe that companies with effective corporate social responsibility programs can deliver better business performance. What’s more, the report suggested that a company’s ESG compliance status would affect the investment decision of 88% of Hong Kong investors.

The Integral Conversation conference at which Freshwater spoke is an annual platform for thought leaders from diverse fields to share insights on topics related to sustainability, including manufacturing, food and technology. It’s organized by Hong Kong-based textile manufacturer, the Esquel Group.

The conservationist and documentary filmmaker Susan Rockefeller, who also participated in the event, told me during an interview together with her husband David Rockefeller Jr, that finance firms today play an increasingly important role in putting pressure on corporations to act in a sustainable and ethical way.

“It’s very important that external costs of climate change are internalised into companies’ accounting,” she said. “From a financial point of view, this highlights opportunities for change.”

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