7 minute read
Business Focus - Plug The Impact
The importance of the S in ESG
Predominantly “E”
Advertisement
ESG, which stands for “Environmental, Social and Governance”, has been at the centre of attention lately, together with the rising interest in sustainability and sustainable practices for companies and individuals.
There has been a significant increase in the amount of data collected relating to sustainability, and every industry is attempting to align on what the ESG approach mandates. As increasingly more companies are praising their management for implementing sustainable plans into their business models and allocating bonuses according to ESG reports and performances, sustainability practices and disclosure can no longer be neglected.
According to CNBC, most of the companies who adopt ESG factors in their investment analysis tend to focus predominantly on the E as the leading criteria for decision making. The increased interest in the carbon market and carbon credits reflects this trend, especially in the context of afforestation projects. Who hasn’t come across at least one program which claims to save the planet by selling a tree to offset your carbon emissions?
That is certainly a good idea to start, but there is simply not enough space on planet Earth to plant enough trees to compensate for everybody’s carbon emissions. What about the S, or social dimension of ESG? Not a lot of people or companies know that focusing on the S can help them save even more CO2 than simply focusing on environmental factors and, at the same time, support entire communities in addressing some of the biggest development challenges of our times.
An overlooked “S”
The social sphere is often disregarded in discussions about offsetting and climate awareness, and it is also not taken into account from an impact point of view. “Planet isn’t necessarily more important than people, it’s just easier to measure. Investors like measuring things that they can put into their models, and carbon is easy to quantify.” This quote underlines how projects with a wider spectrum of impact can also produce carbon credits, and focuses the attention on the whole issue of including social practices into ESG reports through the so called “Social Impact Score”, which is meant to predict the potential social benefits of an investment.
So why exactly is the S overlooked? As the social element of an investment is more difficult to quantify, the world of impact investing seems rather risky to navigate, and the “S” tends to be disregarded. However, it can make a huge difference to the future of our planet and the fate of the climate crisis, as the E and the S are strictly and irrevocably interconnected. How so? As the developed world transitions towards a more stable, sustainable and greener economy and lifestyle, developing countries are still fighting for primary “benefits” such as access to electricity, or access to clean water. Climate change could cause extreme circumstances triggering an exodus of people migrating to more developed areas, looking for better living conditions and opportunities. Thus, if social development is not properly managed, the consequences can be incredibly disruptive.
The consequences of climate change will certainly culminate in developing countries, as they are the ones who need to transition from rural to industrialised societies in a carbon friendly way, requiring significant resources and technologies to do so.
Investing in sustainable solutions for social development will not only help the environment, but will also allow developing countries to meet several Sustainable Development Goals set by the United Nations (SDGs).
The benefits of the social factor
Caring about the environment is essential, but positively impacting people’s lives takes ESG to a whole other level. Some may wonder what the purpose of disclosing environmental or social impact is, and what they can get out of it. By proactively managing and disclosing environmental and social factors, businesses can generate new green investment opportunities, meet consumers’ demand for transparency in terms of sustainability practices and build a positive brand reputation. All of this would certainly allow companies to gain competitive advantage compared to those who fail to account for ESG factors, which will eventually be left behind in the sustainability race. In fact, the lack of regulations that force companies to disclose sustainability strategies is only a temporary shortcoming. Many countries already implemented regulations that mandate high-polluting industries to adhere to strict environmental standards. As these regulations are being drafted for many other industries, it is clear that being sustainable is no longer just a corporate “trend”, but a regulatory reality.
Measurability solutions
So how do we measure the S? And how can we make sure that it gradually gains the importance it deserves in ESG? As many might know, the E has some standard verified criteria to define the units of environmental impact such as carbon emissions avoided in the atmosphere. Similarly, social impact can be measured and quantified according to SDGs criteria, and accounted for in a special “Social Impact Score”. The only problem is that not many players in the offsetting scene offer a social impact calculator, choosing to focus on the easier “planting trees” option instead. Plug The Impact fills this void by assembling all the pieces of this puzzle and creating projects that combine positive environmental and social impact. Thanks to renewable energy solutions, we are able to provide electricity, clean water, irrigation systems, education tools and much more, to villages and communities where no such facilities have ever been installed before. Given the high environmental and social impact that providing clean energy to rural communities has, our projects make sure to generate double the amount of carbon credits that a simple afforestation project can produce.
The triumph of ESG
The three pillars of ESG are profoundly interconnected and require an integrated approach to maximise the benefits. Social and environmental issues are two sides of the same coin, and governance is the frame that ties all of them together. We can’t hope to deliver on the Paris Agreement commitments without taking into consideration all the factors of ESG, and companies should have the means to make informed decisions with regards to their sustainability strategies.
Having the right connections, resources and expertise to guarantee the quality of one’s investment is of the utmost importance, and that is why we founded Plug The Impact. With many years of experience dealing with public funds from governmental institutions and first hand experience implementing projects on the ground, our team has the right skills to provide a clear, transparent, high-quality review of the social and environmental impact that is being made.
Foundation Profile
Plug The Impact positions itself as a connector between companies and individuals who want to transition towards carbon neutrality by supporting projects with a high environmental and social impact.
Impact investing goes hand in hand with environmental consciousness. Plug The Impact believes in this statement, and wants to guide environmental and social investments with transparency and authenticity. Our mission is to put our technical knowledge and expertise at the service of social empowerment and climate change.
Our ultimate goal is to encourage and support the economic and social development of rural communities across the world through a system that we call “Revolving Project Financing”. This system gives rural communities the means to autonomously thrive thanks to renewable energy solutions that can power their daily activities, creating a virtuous cycle of investments that can indefinitely multiply their scope and effect.
