Environmental, social, and governance (ESG) criteria are a set of standards that measure the sustainability and social impact of a company. ESG factors can include things like carbon emissions, waste management, diversity and inclusion, human rights, board independence, and more. ESG performance is becoming increasingly important for both companies and investors, as it can affect the company’s reputation, risk, and long-term value creation.
According to the Global Sustainable Investment Alliance, sustainable investing assets reached $35.3 trillion in 2020, a 15% increase from 2018. This represents 36% of all professionally managed assets in five major markets (US, Canada, Europe, Japan, and Australia/New Zealand). Moreover, a survey by Morgan Stanley found that 95% of individual investors are interested in sustainable investing, and 85% of them believe that ESG practices can potentially lead to higher returns and lower risk.
Clearly, ESG is not a passing trend, but a fundamental shift in how companies and investors approach business and finance. However, many companies still face challenges in integrating ESG into their strategy, operations, and reporting. Some of these challenges include:
There are dozens of different ESG rating agencies, methodologies, and disclosures, which can create confusion and inconsistency for both companies and investors. For example, a company might receive a high ESG score from one agency, but a low one from another, depending on how they weigh and measure different ESG factors. This can make it hard for companies to benchmark their ESG performance, set clear goals, and communicate their progress to stakeholders.
Many companies, especially smaller ones, may not have the capacity or expertise to collect, analyze, and report on their ESG data. This can limit their ability to identify and address their ESG risks and opportunities, and to demonstrate their ESG impact to investors and other stakeholders. Additionally, some ESG data may not be easily quantifiable or comparable, such as social and governance issues, which can pose challenges for measuring and reporting on ESG performance.
Many companies may not have a clear understanding of their investors’ ESG preferences, expectations, and concerns, or how to engage with them on ESG issues. This can lead to a disconnect between the company’s ESG strategy and the investors’ ESG interests, and a missed opportunity to build trust and loyalty with investors. Moreover, some companies may not receive sufficient or constructive feedback from their investors on their ESG performance, which can limit their ability to improve and innovate their ESG practices.
Shareholder clubs are digital communities of retail investors that companies can create and leverage to improve communication and engagement with their individual shareholders. Shareholder clubs can provide various benefits to retail investors, such as rewards, community, and real-time communications.
But shareholder clubs can also provide significant benefits to companies, especially when it comes to ESG performance. Here are some of the ways that shareholder clubs can help companies improve their ESG performance:
Shareholder clubs can help companies raise awareness and educate their retail investors on their ESG strategy, goals, initiatives, and impact. For example, companies can use shareholder clubs to share their ESG reports, highlight their ESG achievements, showcase their ESG stories, and explain their ESG challenges. This can help companies increase their ESG transparency, credibility, and accountability, and also help investors gain a deeper understanding of the company’s ESG performance and potential.
Shareholder clubs can help companies solicit feedback and input from their retail investors on their ESG performance and priorities. For example, companies can use shareholder clubs to conduct ESG surveys, polls, and quizzes, and to invite investors to share their ESG opinions, suggestions, and questions. This can help companies gain valuable insights into their investors’ ESG preferences, expectations, and concerns, and also help investors feel more involved and valued in the company’s ESG journey.
Shareholder clubs can help companies encourage engagement and action from their retail investors on their ESG issues and opportunities. For example, companies can use shareholder clubs to offer ESG-related rewards, such as discounts, donations, or carbon offsets, to investors who participate in ESG activities, such as voting, volunteering, or purchasing. This can help companies align their ESG incentives with their investors’ ESG interests, and also help investors contribute to the company’s ESG impact and value creation.
ESG performance is becoming more important than ever for both companies and investors, as it can affect the company’s reputation, risk, and long-term value creation. However, many companies still face challenges in integrating ESG into their strategy, operations, and reporting, and in engaging with their investors on ESG issues.
Shareholder clubs are a powerful tool that can help companies overcome these challenges and improve their ESG performance. By using shareholder clubs to enhance ESG awareness and education, solicit ESG feedback and input, and encourage ESG engagement and action, companies can create a more transparent, collaborative, and impactful ESG relationship with their retail investors.
At ShareClub, we believe that shareholder clubs can benefit both companies and retail investors, and that ESG is a key area where shareholder clubs can make a difference.
If you’re a retail investor and want to join the waitlist for ShareClub, sign up at the top of this page.
If you’re a public company and want to learn more about how ShareClub can help you create and manage your own shareholder club, visit us at corporate.shareclub.dev or email us at [email protected]. We’d love to hear from you!