We are now in a world where we are experiencing rapid digitalisation across all industries and organisations. Lockdowns made us reconsider the way we live our lives, the decisions we make, and made us more aware of the world we live in. The pandemic also increased public awareness of the growing social issues, so it is no surprise we are witnessing the coming of age of ESG.
The last few years have seen an accelerated shift in the importance of Environmental, Social and Governance (ESG) factors for businesses across the world with global sustainable investment now topping $30 trillion – up 68% since 2014. ESG link together in the sense that the environment, social factors, and the extent to which you have good governance affect your license to operate as a business.
By looking into why now and the factors which have accelerated the conversations we are having, we can look at the ways technology is driving the ‘tech for good’ solutions for businesses and their customers.
In November 2021, the COP26 United Nations Climate Change Conference discussed plans on how we were going to achieve Net-Zero global emissions by 2050, which accelerated the conversations we’re having.
These commitments are expected not only from governments but from the private sector as well with a report finding 67% of employees expect employers across industries to have ESG principles and their jobs to have societal impact. The World Bank estimates that 10% of annual global carbon emissions originate from the industry, more than international flights and maritime shipping put together.
The recent events from the past two years have also had a significant impact on ESG, with the rise in public pressure to do more about climate change and more needing to be done. Businesses have the responsibility to help achieve a more sustainable future with positive climate action. ESG also takes it a step further, it looks at the entire performance of the business and how you’re going to be impacted.
ESG is widespread and interchangeable. When it comes to ESG and technology, it’s a question of whether digitalisation could be one of the main tools for other industries to accomplish their own sustainability goals. Technology brings a range of benefits to people, providing equal opportunities to access resources, providing social good. Businesses and the general public have woken up to it and want to do better, creating so much market opportunity.
ESG investing=good investing
The goal is to build a more sustainable future for all and achieve Net-Zero. This is something both the private and public sector is pushing. A huge transformation is required, and it relies on everyone to contribute, big and small.
According to joint research from PwC and Dealroom, 2020 showed climate tech is in the spotlight. Early-stage investment jumped from $418 million in 2013 to $16.1 billion by 2019, an increase of more than 3750%. However, a sifted survey found 44% of investors and startups found a lack of quality ESG data and analytics were the biggest barrier to investing.
Climate change poses a risk to society, but it is also to businesses, with 34% saying climate change has a high impact on their company’s investment and funding. ESG concerned investors are pulling their money out of risky climate investments and insisting that companies take accountability as climate change becomes more of a problem. The message is clear – if businesses do not evolve and tackle the climate crisis head-on, they are going to be left behind.
Tech for good?
Tech for good start-ups, who look to use their technologies for a sustainable future, bridge industries and sectors and are united by a common goal of integrating sustainability and impact into the core of their businesses. More and more start-ups are looking to improve their ESG performance to make the world we live in a better place.
So while the UK saw a rising number of funding for unicorns in 2021, there is also a growing trend in finding ‘gigacorns’ – a company whose technology can impact global CO2 emissions by 1 gigatonne of CO2 per year being commercially viable. The ETP Clean Energy Technology Guide has identified over 400 technology innovations that contribute to achieving the goal of Net-Zero emissions.
Tech firms are uniquely placed to reduce their climate emissions and develop technology solutions to help their customers meet climate targets. Europe saw $8 billion in funding in 2021, 7x more than the amount received in 2016. London is one of the key locations to receive funding behind Stockholm, receiving $3.3billion since 2016, with $1.1 billion just from 2021 alone.
It is argued the current state of ESG in technology companies has not yet been fully translated into businesses, yet COVID has revealed an unexpected opportunity for tech companies to review their ESG practices. Companies are now taking on the challenge because it is the right thing to do, not simply because it’s good practice. It needs to be challenged: To what extent do you manage your environmental footprint? To what extent are you transparent in your contributions to an industry?
The grass is always greener, shouldn’t technology be the same?
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