The ESG Value Opportunity: A Decision Point for Utilities

Abstract

As communities around the globe experience more frequent and severe effects of climate change, governments, individuals, and the scientific community are demanding action to decarbonize economies to slow the pace of climate change and take actions to mitigate its effects. The idea of human's impact on the climate and surrounding environment began with the introduction of the first Earth Day in 1970, followed by the passing of the National Environmental Protection Act (NEPA) and many others. As extreme weather events continue to affect communities globally in unpredictable ways, there is an ever increasing emphasis on governments and businesses to take deliberate action to respond to the impacts of climate change to build resilient communities. The development of the Environmental, Social, Governance (ESG) criteria is one of the solutions in response to climate change. ESG requires organizations and businesses to consider their environmental impacts, how an organization treats and values their employees, and the principles and policies an entity uses to make decisions. ESG has become a focal point with investors and financial institutions as many investors are looking at corporations to address climate change and how companies should be performing on a moral basis. There is a growing need for an overarching ESG framework to be established at every company; however, utilities have the market and ample opportunity to lead efforts in this space.