ESG Trends in 2024
Managing Director, VAS- India & South Asia Markets, CRIF Solutions
2024 is set to be a whirlwind of environmental, social, and governance (ESG) evolution. As climate changes intensify and social inequities persist, investors and stakeholders are demanding more than just green promises – they want measurable impact and responsible action. This year, ESG won't be a peripheral niche, but a central force shaping corporate strategies and investment decisions. Let’s look at some trends that could shape the ESG strategies in 2024.
Integration of AI and Data Analytics for ESG Assessment
In 2024, we'll witness a significant rise in the data integration of AI and data analytics, transforming the way we measure and monitor ESG performance. Advanced analytics with predictive capabilities will empower companies to anticipate potential risks and opportunities related to ESG issues. Imagine forecasting future water stress on supply chains or predicting social unrest linked to labor practices. Such foresight will guide proactive mitigation strategies and drive resilience.
More Standardized Reporting
With the increasing number of ESG reporting frameworks and regulations, there is a growing push for standardization. The 2024 reports may start to reflect a more consistent approach to ESG reporting, making it easier for investors and stakeholders to compare companies.
Increased Focus on Stakeholder Engagement
ESG reporting will no longer be just a regulatory requirement; it will become a tool for effective stakeholder engagement. Companies will prioritize engagement with customers, employees, communities, and suppliers, recognizing their integral roles in sustainability efforts.
Green Finance and Impact Investing
Green finance instruments, such as sustainable bonds and climate-focused funds, are anticipated to experience significant growth. This influx of capital will energize projects in renewable energy, energy efficiency, and green infrastructure, fostering a more sustainable economy.
Moving beyond financial metrics, investors will actively seek investments that generate measurable positive social and environmental outcomes. This could involve supporting initiatives that address poverty, inequality, and climate change, with a focus on quantifiable metrics.
Evolving Regulatory Landscape
Mandatory ESG reporting will slowly become the norm, The EU's Corporate Sustainability Reporting Directive (CSRD) is a prime example, mandating comprehensive sustainability reporting for large companies globally.
These represent just a few of the pivotal trends anticipated for 2024. Companies must adopt a forward-thinking perspective, integrating sustainability into every facet of their business decisions for long-term success.
The road ahead demands a multi-pronged approach:
- Data-driven decision-making: Investing in robust ESG data collection, analysis, and reporting systems will be crucial for informed decision-making.
- Collaboration is key: Partnerships with internal and external stakeholders will foster knowledge sharing and accelerate progress.
India has pledged to achieve carbon neutrality by the year 2070. Currently, the power, steel, cement, and agriculture sectors contribute to around 70 percent of carbon emissions in the country. While numerous Indian organizations are actively working to diminish their carbon footprint, it is evident that not all of them have established robust strategies to address the impacts of climate change.
To foster progress in environmental, social, and governance (ESG) practices, organizations can adopt various measures. These include establishing ambitious targets to reduce greenhouse gas emissions, implementing comprehensive carbon management practices, and undertaking thorough assessments to disclose climate-related risks and opportunities. By taking these proactive steps, organizations can significantly contribute to building more resilient and sustainable ESG strategies.