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ESG transformation: Best practice is grounded in resilience

Environmental, social and governance (ESG) topics and interest have gained momentum through the focus of the Biden administration, investor letters, and heightened employee and consumer concern about climate change. Variously interpreted as an investment philosophy, a proxy for “good risk management” and an authentic alignment with core values, ESG also represents underlying risk factors for investors and others.

Along with reporting and compliance, middle market companies are incorporating risk assessment strategies into both investment decisions and risk management processes.

Transitional Risks to Business

Increasingly, those situated within organizations’ second and third lines of defense are asking why and how ESG physical and transitional risks impact the business, including how the organization can get ahead of these trends.

As the U.S. market gains greater climate consciousness and moves from asking “What does this mean?” to “What can I do?” the emergence of ESG risk as an executive agenda item is inevitable. From the asset managers to the chief legal, risk and compliance officers, the imperative is to govern risks that seek to provide transparency for accountability, actions and assurance. ESG risks have broad implications for organizational leadership and organizational strategy, both in the near and long-term.

But with risks identified and managed, your organization can be stronger for investing efforts and finances in ESG activities. Studies have shown that organizations that embrace and apply ESG standards are more risk resilient and more likely to succeed in the face of volatility. They are also delivering higher returns to shareholders.

Learn more about assessing and mitigating risks: ESG resilience: A true measure of success.

This post originally appeared on the Grant Thornton blog.

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