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Overview of ESG Model for Scoring Corporations in the Telecommunication Sector

The ESG model is utilized for scoring as well as assessing the corporations operating in the telecommunication sector on the basis of the of the ESG factors namely governance, social and environmental factors (Ashwin Kumar et al. 2016).  The telecommunication organizations are generally provided with accounting metrics by SASB that is the sustainability accounting standard which aid to account the overall measurement of the sustainability performance (Grewal, Hauptmann and Serafeim 2017). The 7 metrics for measuring the priorities of ESG in the global telecommunications are stated below (Serafeim and Trinh 2021):

  • of wireless subscribers
  • Network traffic: It is regarded as competitively quite sensitive and thus generally are not disclosed
  • The explanation of the practices as well as procedures with regards to customer privacy and behavioural advertising (Serafeim and Trinh 2021).
  • The overall quantity of the customers or consumers whose data or information is utilized for the secondary purposes.
  • The total quantity of the requested related to law enforcement for the customer data and information, percentage leading to the disclosure and the total quantity of the customers whose overall information or data is requested.
  • Percentage of renewables, percentage of the grid electricity and the overall energy utilized.
  • Explanation of the approaches for recognizing as well dealing with the data security risk incorporating the utilization of the cyber security standards for 3rd

GeSI (Global e-sustainability initiative) with the its precise strategic direction which is assisted by materiality analysis introduced viable fundaments for itself so as to grow and consolidate and drive the international sustainability agenda via credible, transformative and advocacy action. The ESG priorities according to the British Telecom are exposure risk to the electromagnetic waves, frequency rate for industrial accidents, Intellectual properties like ecosystem, organizational and human resources, business ethics, environmental management system, sustainability development strategy, HSE, corporate governance, and the products and services (Park and Jang 2021). The general issues which are reported by the non-profit stakeholders were huge energy consumption, ecological gloom-mongering, possible risk to the overall health of human and so on. It is observed that the ESG priorities identified above are quite different from the ones listed in the case study. There are certain old matrices replaced and new metrics introduced as per the changing conditions of the environment. The current ESG performance of British communication is required further to make appropriate decision since it will provide clarity regarding the current sustainability position of this sector which would help in making necessary decisions.  It is recommended that the sector must look after the problems which are faced by the non-profit stakeholder and take necessary steps to deal with them like setting up priorities on the basis of the problem.

Environmental, social and governance (ESG) are considered as the factors which are utilised to understand the societal and sustainability effect of the specific investment of the business or company (Schramade 2016). This approach is utilised to evaluate the returns and risks of the specific investment that is the future financial performance of the business (Escrig-Olmedo et al. 2017). Nevertheless, there are certain arguments placed against the utilisation of ESG criteria to value a business or company. It is observed that the seventy per cent of the overall environmental, societal and governance data points evaluates whether a business has appropriate policy and procedures in place; however having a procedure and policy in place does not evaluate the overall level of the commitment towards executing that procedure and policy (Conca et al. 2021).  An effective check from the perspective of investment is to blend the policy disclosures with its real performance (Fatemi, Glaum and Kaiser 2018). Thus, certain factors of ESG do not take into consideration the actual performance of the company’s investment. This is due to the fact that these factors emphasises more on economic sector rather than societal and environmental sectors (Mervelskemper, L. and Streit 2017). The second argument is that this ESG approach do not incorporate the factors which are easily and effectively quantifiable (Howard-Grenville 2021). These factors generally does not give contribution to the overall performance improvement and earnings growth for the business or organisation (Hübel, B. and Scholz 2020). This is usually sign of certain degree of inaccuracy (Klein 2020).

ESG for Evaluating Business Sustainability in Soya Production

It is observed that soya is among the most crucial driver of international deforestation. The soya crop is significantly relied on the irrigation system in certain areas and huge demand of water can also result in water issues in the growing area. The pesticides and fertilizers utilized in the production of this soft commodity might affect the overall quality of the water bodies in that area. The major ESG related priority in this case is to make this soft commodity sustainable. From importers to the producers all need to share the responsibility of addressing the unfavourable social and environmental impacts of this commodity. The industry associations, and forestry systems needs to intervene and set up scalable and effective policies as well as procedures to deal with the ESG priorities. There are certain challenges which the company might face in relation to its operation like its high vulnerability to climate change, need of fertilizers for proper growth and so on. Moreover, it might also face challenges related to its investors like the investor might not be happy with the higher cost of production due to implementation of sustainability processes and so on.

Green real estate investment trust (green REIT) is the trust which aims to encourage advancement of the green building by investing in efficient and sustainable way. Investors make effective investments in the green REIT since it provides them with the valuable and viable opportunities to take participation in the construction and real estate projects which intends to enhance the society’s living standard. Green REIT needs financial model for making prediction of the current value of the future cash flow produced by the property accurately. REIT utilized 2 kinds of financial models namely net asset value model and relative pricing model. It is observed that the operational and financial performance of green REIT is influenced by the green buildings. Nevertheless, distinct set of the outcomes will be obtained by distinct measures of greenness of the property portfolio of the REIT. Investors selects the REITs for certain reasons like fundamentally their prospective for inflation hedging, portfolio diversification and enhance in the overall value. When selecting the REIT, choosing criteria generally incorporate market sector, kind of property and location. However, there is the emerging consideration. Assessing such REITs as per their respective exposure to the environmentally certified buildings or green buildings provides a manner consider the growing influence of the environmental factors on building investment returns as well as its performance. Real estate properties both in use and construction has a crucial effect on the society or environment. The two major environmental certification scheme for real estate properties in the United States namely energy star and LEED (leadership in energy and environmental design). As per LEED program, the independent audits needs to assure that waste, energy and water management resources are utilized effectively which the sustainable building materials have been utilized in the construction process and the air quality issues needs to be managed. Moreover, energy star is the voluntary developing labelling initiative fabricated to recognize and encourage the energy-saving buildings as well as to minimize the greenhouse gas emissions and the overall energy consumption. Ratings are on the basis of the entire building energy utilization relative to the buildings of the similar size and type. It will significantly influence the overall financial performance since the company will not be able to get hold of investors if it does not consider the environmental effect of its construction.

Financial Models and Environmental Certifications for Green Real Estate Investment Trusts (REITs)

Impact investing is the primary investment strategy which intends to produce significant financial returns and at the same time also builds up positive environmental or social impact. In simple words, it can be defined as investment which is made into funds, organizations and companies with an aim to produce beneficial, measurable environmental or social impact with the financial return. AWIF (Asia women impact fund) is an impact investing fund that foresees a future in which every women living in Asia are being empowered to attain their complete potential. It is incorporated by the SPF (Sasakawa peace foundation) in the year 2017. This foundation is a private foundation of Japan founded in the year 1986 so as to improve global corporation. This impact investing fund is an initiative which aims to make investment up to $ 100 million so as to support the gender equality and economic empowerment of women. It is observed that this fund has enhanced gender equality in staffs and has the tendency to add about $28 trillion to the international Gross domestic product by the end of 2050. Moreover, it is seen that Southeast Asian businesswomen recruits 17 per cent more female staffs in comparison to male owners, developing the trickledown effect. The companies listed in fortune 500 in top quartiles for the women board-level representation gets 53 per cent of the higher returns on their equity in comparison to the ones in lowest quartile. This foundation is significantly investing in the said amount which is improving the overall gender results for the females and produce the competitive returns.  Thereafter, this fund would utilize such financial returns to give initial stage female entrepreneurs in the Southeast Asia with an adequate access to the resources like the mentoring, technical assistance, and initial stage investments. This fund would develop the required awareness regarding the ways in which metrics related to gender impact could be applied across the entire investment procedure, build up the female focused investments and organize the collaborative forums.

References:

Ashwin Kumar, N.C., Smith, C., Badis, L., Wang, N., Ambrosy, P. and Tavares, R., 2016. ESG factors and risk-adjusted performance: a new quantitative model. Journal of Sustainable Finance & Investment, 6(4), pp.292-300. ?

Conca, L., Manta, F., Morrone, D. and Toma, P., 2021. The impact of direct environmental, social, and governance reporting: Empirical evidence in European?listed companies in the agri?food sector. Business Strategy and the Environment, 30(2), pp.1080-1093.

Escrig-Olmedo, E., Rivera-Lirio, J.M., Muñoz-Torres, M.J. and Fernández-Izquierdo, M.Á., 2017. Integrating multiple ESG investors' preferences into sustainable investment: A fuzzy multicriteria methodological approach. Journal of cleaner production, 162, pp.1334-1345.

Fatemi, A., Glaum, M. and Kaiser, S., 2018. ESG performance and firm value: The moderating role of disclosure. Global Finance Journal, 38, pp.45-64.

Grewal, J., Hauptmann, C. and Serafeim, G., 2017. Stock price synchronicity and material sustainability information.

Howard-Grenville, J., 2021. ESG impact is hard to measure-but it's not impossible.

Hübel, B. and Scholz, H., 2020. Integrating sustainability risks in asset management: The role of ESG exposures and ESG ratings. Journal of Asset Management, 21(1), pp.52-69.

Klein, C., 2020. Quantitative Credit-Rating Models Including ESG Factors. The Journal, 1.

Mervelskemper, L. and Streit, D., 2017. Enhancing market valuation of ESG performance: is integrated reporting keeping its promise?. Business Strategy and the Environment, 26(4), pp.536-549.

Park, S.R. and Jang, J.Y., 2021. The impact of ESG management on investment decision: Institutional investors’ perceptions of country-specific ESG criteria. International Journal of Financial Studies, 9(3), p.48.

Schramade, W., 2016. Integrating ESG into valuation models and investment decisions: the value-driver adjustment approach. Journal of Sustainable Finance & Investment, 6(2), pp.95-111.

Serafeim, G. and Trinh, K., 2021. Accounting for Product Impact in the Telecommunications Industry. Harvard Business School Accounting & Management Unit Working Paper, (21-105).

Serafeim, G. and Trinh, K., 2021. Impact Accounting for Product Use: A Framework and Industry-specific Models. Harvard Business School Research Paper Series, (21-141).

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