Arquivo da tag: socio-environmental

What does ESG mean and how is it related to Private Social Investment?

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In 2005, during the ‘Who care wins’ conference organized by the International Finance Corporation (IFC) in collaboration with the United Nations (UN), world leaders examined the role of environmental, social and governance values in asset management and financial research. On that occasion, there was a consensus that these three factors play a key role in long-term investments. 

Hence, the creation of the ESG (environmental, social, and governance) agenda was officially established, along with the expectation that companies would report their actions consistently and proactively. The agenda ultimately brought the financial market closer to the sustainability debate. At the same time, this same sector began to consider in its decisions the risks that these issues might present to the value and longevity of private organizations.

In this article, you will be able to better understand what ESG is and how it influences – and is influenced by –  other topics such as Private Social Investment.

 

What does ESG mean?

Although it was created almost twenty years ago, it was only in 2020, during the pandemic, that this agenda gained popularity, gaining strength especially from the stance of major economic stakeholders in favor of corporate sustainability.

First and foremost, it is important to clarify that when it comes to ESG, we are mainly talking about the relationship between the private sector and the financial market. In other words, when considering investing in a company, investors begin to incorporate environmental, social and governance issues into their decision-making process. These elements are considered important to evaluate the investment quality and non-financial risks. 

Thus, it is understood that companies start to give more serious consideration to how they mitigate or more proactively address aspects that affect all stakeholders involved and interested in their operations, from collaborators to the surrounding society. This incorporates the ESG agenda into the company so that it is possible to achieve a more sustainable world and society.

“It’s not just about seeing, measuring and managing risks from a broader perspective, but also the active search for the generation of positive results in all of the aspects that surround companies activities” 

ESG Practical Guide for Investors, Mattos Filho law firm

 

Environmental agenda

The ‘E’, meaning environmental, focuses on actions that aim to reduce and mitigate the environmental impact caused by companies through efficient management of natural resources, climate change mitigation, reduction of carbon emissions, waste management, adoption of more sustainable production practices and so on.

 

Social agenda

The ‘S’ on the ESG agenda addresses matters related to the well-being of people both inside (collaborators) and outside the company, in the communities where it operates. This axis aims to take a careful look at issues that vary from health and occupational safety, diversity and inclusion policies, relationship with the community, and even corporate social responsibility, volunteering and private social investment, among other matters.

 

Governance agenda

Last but not least, the ‘G’ addresses corporate governance practices. The principles of corporate governance map out practices related to integrity, equity, transparency, ability and sustainability of its governance. Going from an organization’s boards and committees to its financial and ability policies.

 

How does Private Social Investment relate to the ESG agenda?

Private Social Investment, or Strategic Philanthropy, is the voluntary and strategic allocation of private resources for the public good, these being financial, in cash, human, technical or istrative. In order to promote social transformation, this donation needs to be strategically planned, anchored to data, with predefined indicators, careful execution, monitoring of results and evaluation of its impact. 

In this regard, when an organization defines the focus and strategy of their donations, it is understood that these practices will be necessarily aligned to the purpose and values of the institution, as well as approach all of the stakeholders impacted by or who impact the company’s actions.  

But how does ESG fit in all of this? Well, through strategic philanthropy, companies can direct resources to projects, civil society organizations( CSOs) and initiatives that collaborate for the socioenvironmental development of the community. As we understand that strategic private social investment acts in line with the business, the ESG agenda acts as an ally in the development of these practices, measuring and mitigating financial risks.

It is a two-way street. As the ESG agenda contributes to a more strategic decision-making process in regards to private social investment, private social investment acts as a key tool for achieving ESG goals and pledges. 

 

IDIS actions on the ESG agenda

With the impotence growth of the ESG Agenda, IDIS has been investing on the strengthening of its team with specialists and in the production of knowledge of this topic, including the development of methodologies which aid social investors in their decision-making process. 

 

Access more content on the topic here!

In 2023, an ESG advisory team became official, offering technical to companies and social organizations who wish to improve their ESG strategies, as well as connect them to their strategic philanthropy practices. Among the services offered are ESG strategy connected to Private Social Investment; risk and opportunity mapping; (re)structuring of socio-environmental projects; establishment of thematic committees; and alignment of indicators and metrics for consistent reporting.

Socioenvironmental: the integration of social and environmental spheres

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The pursuit of sustainability has become a fundamental goal for organizations, considering its value to society and the preservation of natural resources and the environment, as well as its benefits for organizational development and growth. This pursuit encomes the economic, social and environmental spheres, which, although often addressed separately, are highly interconnected.

The current trend towards adopting sustainable practices is further driven by the urgency of climate change. According to the Sixth Assessment Report of the Intergovernmental on Climate Change (IPCC), climate change is undeniably caused by unsustainable energy use, land use changes, unequal consumption and production patterns, and lifestyles, resulting in high greenhouse gas emissions. These changes have already caused a 1.1ºC increase in the planet’s average surface temperature compared to pre-industrial levels. Their impacts range from human health and well-being to biodiversity and ecosystems.

 

But how do the environmental and social spheres intersect?

In general, it’s true that all economic activities have some environmental and social impact. With the evolution of corporate sustainability, now incorporated into the ESG (Environmental, Social, and Governance) agenda, organizations seek to mitigate their impacts within the social and environmental spheres through initiatives ranging from diversifying product and supplier portfolios to engaging stakeholders and implementing private social investment (PSI) actions. The complexity of the correlation between the social and environmental spheres necessitates equally complex initiatives.

While the environment is commonly understood as the natural world elements (water, air, soil, plant and animal biodiversity), its concept is broader. It typically includes not only these natural elements but also the relationships between people and their living environment, considering political, economic, cultural, and health aspects. Thus, addressing environmental initiatives inherently involves an integrated approach that also considers the social dimension.

Changes in the social sphere often correlate with environmental impacts at various levels, and vice versa. Among the various possible impacts and correlations, the following example focuses on water-related impacts, specifically alterations in water resources:

The interconnected functioning of these spheres is evident through this example. But could an environmental project operate, even in a remote location, without direct interactions with society? Initially, it may seem possible; however, considering the systemic impacts of the environment — namely, the natural environment and its relationships with society — it becomes clear that the interdependence of these concepts is inherent. The same applies to social projects; it is necessary to consider environmental factors.

Therefore, the need for a t approach to these spheres is evident. Failing to consider the socio-environmental interconnectedness within projects and initiatives diminishes their effective impacts and their ability to reach broad audiences. The Intergovernmental on Climate Change (IPCC) has emphasized the importance of integrating all sectors of society and implementing cross-cutting actions that address the complexity of interdependencies among climate, ecosystems, biodiversity, and human societies, particularly concerning climate change. This also applies to socio-environmental integration.

 

The role of philanthropy and Private Social Investment

The interdependence of spheres and, consequently, the causes associated with each of them, form a complex issue in which philanthropy and private social investment are already well equipped to act, without losing focus on the beneficiaries, namely those most affected by socio-environmental damage.

In our material, Perspectives for Brazilian Philanthropy 2024, we address the poly-crisis generated by this interdependence of spheres, highlighting the cross-cutting nature of causes and responses, and emphasizing the incorporation of these themes into our ecosystem’s strategic approach. Including connections, stakeholders, causes, and consequences in projects enables more informed decisions for generating structural changes.

This cross-cutting approach can be observed, for instance, in the Water Grant from the Mosaic Institute, which encourages community projects focused on water resource management and sustainable agriculture.

In the 2024 grant, the Institute offers up to R$45,000 for at least 12 projects contributing to SDG 6 – Clean Water and Sanitation – of the UN’s Agenda 2030. Projects aim to promote best practices in water resource management, increase access to water and sanitation, expand sewage and water treatment systems, preserve and restore water-related ecosystems, provide professional development for civil society organizations, and foster intersectoral cooperation.

 

IDIS in promoting socio-environmental action

Through well-planned and monitored private social investment, companies can navigate the interplay between Social and Environmental aspects, demonstrating their socio-environmental commitment to key stakeholders. Furthermore, they can engage stakeholders in collaborative processes to address complex social and environmental issues.

IDIS provides technical to families, companies, and social organizations looking to initiate or enhance their private social investment with an integrated view of Environmental and Social aspects. We operate in a customized and participatory manner across six areas of action.

For more details, please us at [email protected]