Content area
Full text
More and more companies are committing publicly to adopt environmental, social, and governance (ESG) strategies. The equipment finance industry sees more funding sources, employees, clients, and business partners planning for an ESG future. Improved clarity in reporting and regulatory requirements can aid thoughtful ESG value creation.
Over the past several years, an increasing number of companies have made public commitments to adopt environmental, social, and governance (ESG) strategies. Although these standards have been in place for over 15 years, during the COVID-19 pandemic, a dramatic increase in interest and investments in ESG materialized. The reasons for this are numerous and include:
* Increasing public awareness of the effects of climate change and the need to take remedial action
* Heightened sensitivity to social justice concerns
* Prioritization of diversity, equity and inclusion (DEI) issues among boards, employees, potential employees, and consumers
* A desire among investors to invest in and do business with firms that share their core values
* A proliferation of public funds focused on green assets and initiatives
* Actions taken by a number of governmental and regulatory bodies mandating corporate disclosures of ESG initiatives
* Net-zero carbon commitments made by major companies, with banks looking to extend those commitments to companies for which they provide financing
Clearly the effects of a heightened ESG focus are being felt throughout the global economy. The equipment finance industry is no exception, as funding sources, employees, clients and business partners are planning for an ESG future. While these trends are nascent, a number of industry participants are getting ahead of the curve in adopting strategies to reduce their carbon footprint, address DEI and social issues, position themselves in the war for talent, and finance the equipment necessary to achieve a net-zero carbon future.
Adoption of ESG strategies will require the equipment finance industry to examine both internal and external options that better align with investor requirements for increased ESG transparency and market demands. These could include enhanced availability of financing options for preferred ESG asset classes or utilization models.
Today ESG data collection, standard-setting, and disclosure represent an alphabet soup of acronyms that has fostered an environment of ambiguity, confusion, and conflict. However, as ESG reporting and regulatory requirements evolve and become more standardized,...