GOVERNMENT should ensure that the private and public sectors, comply and disclose their level of upholding environmental, social and governance (ESG) standards, a university lecturer has said.
BY BUSINESS REPORTER
The recommendation to have organisations adopt ESG standards will help a company’s operations in attracting socially conscious investors.
Speaking at the Corporate Social Investment conference yesterday in Harare, Great Zimbabwe University lecturer in banking and finance, Campion Chiromba said individual investors, on their own, were unable to influence the behaviour of intermediate entities regarding ESG and corporate governance standards.
“Policymakers should ensure that investors uphold their obligations to the end and guarantee their long-term returns by investing in entities that uphold environmental, social and governance factors and advocating for those that do not, to do so,” he said.
Chiromba said policy makers and institutional investors should work together to shape the investment framework in the country.
“Investors in Zimbabwe are worried more about expected return and a firm’s financial stability no matter what measures the entity takes to achieve these.
“Investors invest for selfish reasons, hence, they do not consider issues that do not directly affect them, especially, in the long run. Policy makers and institutional investors should work together to shape the investment framework,” he said.
Chiromba said investors are rational and responsible and will invest more in entities that have ESG standards and a high level of corporate governance.
According to the Global Sustainable Investment Review 2014, the global scale of sustainable and responsible investment grew to $21,4 trillion at the start of 2014.
Chiromba, however, said in line with legislation, policy makers and private organisations should embark on massive education campaigns on the importance of ESG factors to investors.
“Entities should find themselves self-compelled to uphold ESG standards and investors should also find themselves self-compelled to invest with firms that uphold such factors. The Zimbabwe Investment Authority should ensure that both local and foreign investors incorporate ESG issues in MoUs,” he said.
Chiromba said banks should also ensure that firms incorporate ESG issues in their projects before being issued loans.
The United Nations Environmental Programme Finance Initiative and Mercer 2007 joint report found that out of 20 academic studies, 10 had a positive relationship between ESG factors and portfolio performance.
The report also found that seven reported having a neutral effect, while three reported a negative effect.
Chiromba said in Zimbabwe, both local and international investors, had not been able to fully respect and protect the host communities’ social and economic rights because the government has not been effective in its supposed role to protect the citizens from the abuse of their rights by business-related activities