Chuka Umunna warns companies of need to focus on environmental, social and governance issues
Chuka Umunna, the former Shadow business secretary, today declared it was vital that companies heed their environmental, social and governance responsibilities as reputational crises grip Nike and Boohoo.
Umunna, who this week announced he had been made head of ESG at corporate communications giant Edelman, said the backlash against Nike’s failure to have any black board members despite its support for Black Lives Matters and the controversy over conditions at a Boohoo fashion supplier in Leicester showed poor ESG was bad for profits and share prices.
“If you’ve got a poor ESG profile it inhibits your access to capital and your share price massively.”
He added: “But there is also a massive opportunity. There is around $30 trillion invested globally in sustainable ESG assets and that’s only going to grow. And there is an increasing weight of research that illustrates ESG conscious firms are outperforming the mainstream by some margin.”
He said it was vital ESG was seen as a profit driver, rather than merely philanthropic, activist or charitable activities such as those championed by the Corporate Social Responsibility movement.
“Before, ESG was seen as slightly wishy washy and associated with CSR. The people who would go into ESG roles would not be coming from the core parts of a business. They might come from the third sector or whatever. Now, though, you have major figures in finance taking up these roles from other big positions.”
He cited Marisa Drew, head of European, Middle East and Asian investment banking at Credit Suisse who has now moved to be head of “Impact” – jargon for ESG – and Richard Threlfall, who moved last month from his role as global head of infrastructure at KPMG to run its Impact arm.
Citibank has just put senior banker Keith Tuffley in charge of a new sustainability division.
“You’ve got people moving across quite big roles in banks and other professional services firms not just because it’s the right thing to do but because it’s highly lucrative.”
He pointed out that in the UK alone reaching our 2050 target of net zero emissions will require some £70 billion a year of private capital that will have to be arranged.
“Quite rightly, gone are the days when ESG was seen as the terrain of the tree hugger, green revolutionary. We have to bury that stereotype. You need that space to be seen as lucrative in order to attract more investment.”
He pointed out that hedge fund Marshall Wace had just set up a new £1 billion fund to invest in companies that score well in ESG.
“You want companies that invest in ESG to be seen as the most profitable, the most lucrative because then they will be able to attract more funds, which is what we need to be able to plug the gap needed to green the economy.”
He said: “I’m a capitalist but there are different varieties of capitalism than the one we have had up to now which just hasn’t been delivering the goods for enough people.
“If we’re to fundamentally change the model of capitalism we’ve got to ensure that the overwhelming majority of businesses are integrating ESG factors into corporate decisionmaking like never before.”
He said that, at Edelman, he would be advising both companies and asset managers. That would involve helping companies gain good ESG scores so they could attract more funds from investors, and helping those investors find good companies with strong ESG credentials.
