Reaching ESG goals with renewables

Chances are you’ve been hearing a lot about ESG investing lately – whether you’ve read about it on a news website, seen it on a cable news show or heard its mention in investment circles.

But ESG investing isn’t just a fleeting fad or a buzzword. It’s been around for more than 20 years and has the potential to have a significant impact on the brand, financial metrics and outlook of organizations.

That makes it less of a good public relations story and more critical to the long-term success of your business.

In short? To help promote a stronger corporate brand and long-term growth, now is the time to take a proactive approach to integrating ESG strategies into your overall business model.

And we know just how to get you started.

In this guide to renewables and ESG investing for businesses, we’ll help you better understand not only what sustainable investing is but also what it means for businesses and how you can leverage it to make smarter investments in renewables that position your organization for long-term success.

What is ESG investing?

esg financing

Let’s start with the basics.

A growing number of institutional and individual investors are evaluating their investments with companies, taking measured steps to align themselves with organizations whose values reflect their own.

In recent years, public awareness and support for social and environmental issues have gained steam, and investors want to know how companies are navigating climate change and how they’re thinking about jobs for tomorrow, company culture, company oversight, etc.

Enter ESG investing.

Environmental, social and governance (ESG) investing is a megatrend in the investment world.

It’s a three-pillar system that evaluates:

- Environmental – How a company performs in terms of its ecological and environmental responsibility to the community. This may include a company’s energy efficiency, how they’re incorporating carbon-free renewables into their energy mix, actions they’ve taken or are taking to mitigate climate change, initiatives around natural resource and habit conservation, supply chain and environment initiatives, etc.
- Social – How companies are managing relationships with employees, suppliers, customers and the communities where it operates. This may include whether a company works with other suppliers who share the same values or how they’re investing and giving back in local communities, showing high regard for employees’ health and safety, commitments to diversity, equity and inclusion, etc.
- Governance – Policy, goals and how a company’s leadership, executive pay, audits, internal controls and shareholder rights operate. Governance also covers conflicts of interest, political contributions for favorable treatment, etc.

If you’re thinking that ESG investing trends are for a small or relatively niche market, guess again. In spite of the onset of a global pandemic, sustainable funds attracted a record $51.1 billion in net flows in 2020 – more than twice the previous record set in 2019.

And with policy leaders around the world pushing to dramatically reduce emissions, lower resource usage and pull greenhouse gases from the atmosphere, interest in sustainability is only expected to continue to grow – not only among investors but also among businesses.

In fact, millennial and Generation X investors are reportedly set to inherit an estimated $30 trillion in wealth in the coming years, with a 2018 Morgan Stanley study suggesting that this group is also twice as likely to invest in companies and funds that align with their environmental and social values.

In episode 13 of our Beyond the Meter podcast, which takes a close look at ESG investing and innovative financing models, Duke Energy Chief Sustainability Officer Katherine Neebe discussed the emerging ESG conversations and dialogues.

“I see ESG fundamentally as being core to a company’s strategy – not a side-on, not a tack-on, not something that’s nice to do. But fundamentally, how are we thinking about the big issues and things that matter to us and things that we matter to?” she said. “Taking a step back, we’re seeing a massive influx of money heading in this direction.”

Why are ESG initiatives important for my business?

So, we know why the growing popularity of ESG investing is important to investors.

But how exactly does ESG investing impact businesses like yours?

Think a stronger and more positive reputation and/or brand. Reduced business risks or mitigated negative outcomes, thanks to a greater emphasis on corporate environmental, social responsibility and corporate governance. And improved long-term financial performance across a range of metrics, courtesy of a growing body of research in recent years.

In fact, an NYU Stern Center for Sustainable Business and Rockefeller Asset Management analysis of 1,000-plus research papers examined the relationship between ESG and financial performance from 2015 – 2020. The analysis found that not only did sustainability initiatives appear to drive better financial performance for companies, but the studies also indicated that managing for a low-carbon future improved financial performance.

Want to know additional ways a focus on ESG values helps position organizations for success?

A 2019 NASDAQ article suggests robust ESG initiatives can also help organizations:

- Adapt to changing socioeconomic and environmental conditions by better positioning themselves to identify strategic opportunities and meet competitive challenges. By taking steps on issues such as sustainable environmental policies, these companies are also better able to strengthen their brand.
- Attract more value-based investors who understand that change takes time and who are more interested in building long-term value over a multiyear period than flipping stock in the near term.
- Attract and retain employees who are passionate about the organization and who have a vested interest in strengthening the brand of the company.

So, ESG initiatives can be a win-win for your organization – and incorporating renewables into your energy mix can be just the right solution to better reaching your ESG goals.

Finding ESG opportunities in renewables and net-zero emissions goals

Setting and achieving net-zero emissions goals is just one way a growing number of companies across a variety of industries are folding more environmentally conscious goals into their overall business strategy, making them more desirable to socially conscious investors.

And with so many renewables and cleaner energy alternatives – including on-site self-owned projects, power purchase agreements, virtual power purchase agreements and more – companies are finding it easier and more affordable to leverage renewables and achieve sustainability goals.

Let’s take a closer look at additional organizations whose commitments to cleaner energy have allowed them to make a broader impact on mitigating climate change, helping underserved communities and more:

Environmental Leadership

- In 2020, George Washington University committed to accelerate its carbon neutrality timeline to at least 2030. The university has an ambitious goal to divest 100% from fossil fuel investments and remove all greenhouse gas emissions produced since its founding in 1821. It invested in large-scale solar generation near its Washington, D.C., campus – a move that helped to immediately cut its carbon footprint by 20% and inspired other universities to expand their renewables investments.

- Global manufacturer Ball Corporation strives to not only help with global efforts on climate change but to improve the company’s performance and help customers reach their own emissions reduction targets. The company is keeping its emissions reduction targets in line with climate science by investing in a low-carbon sustainable energy infrastructure to achieve its ambitious goal of reducing absolute carbon emissions within its own operations by 55%.

Social Impact

- Kroger sought to cut energy spend at the La Habra Bakery and find more ways to deliver on its Zero Hunger | Zero Waste social impact plan. Leveraging emissions-free renewable energy was crucial to Kroger spending less on electric bills and putting more investment into communities. A rooftop solar project that consisted of nearly 3,000 solar panels on the bakery’s 300,000-square-foot rooftop reduced 1,420 metric tons of emissions, equivalent to powering 240 homes annually.
- Blue Lake Rancheria chose sustainability first to address energy, food sovereignty, water, communications and information technology. With a goal of net-zero carbon emissions by 2030, a microgrid helped it better reach its goals by cutting energy costs while powering more than 50% of operations during grid outages.

As you can see, these organizations (and so many more!) are leading the way in reducing their emissions and achieving real, measured sustainability goals through affordable and innovative financing and operating solutions. Their commitment to sustainability isn’t an afterthought; it’s part of their overall business practice.