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“Climate is not a concern of one country or continent. It is a concern of globe and global economic is impacting it as well as getting impacted.”
With this saying, the most vulnerable aspect of human development is also the one which has clearly played a major role in bringing forwards the doomsday as well as is also the one getting greatly affected because of any prolonged climate change impact. This aspect is none other than our global economy. To develop it during pre-industrial era, our forefathers completely neglected our climate & ecosystem. It became practice which we kept following until the end of 20th Century. 21st Century was brought many changes in many sectors and the one which are going to refer here is the change happened in the finance sector. Initially investors or portfolio managers used to consider financial performance of an organization before investing. The sector as well as Investors, assets managers and portfolio managers etc. never considered about accounting non financial parameters of an organization into decision making. But when UNEP-FI decided to setup a body for responsible investment, it became evident that this sector is now going to face major changes. Later on when cases like Face book data leak, BP Oil Deep Horizon Oil Leak etc. incidents happened. The Investors realized the importance of impact of non-financial parameters on the financial performance of an organization. These Non-financial parameters are termed as ESG Parameters by UN-PRI in one of their reports. This research work’s main objective is to observe and understand whether financial parameters of an organization are directly linked with ESG parameters or not.
In this research work, we have taken a set of S&P 50 companies and derived their ESG ratings using companies existing Sustainability reports as well as annual reports and other open resources. These 50 companies were later on categorized into their industry sectors namely, Finance, Pharmaceuticals, Technology& Communication, Consumer goods, Services etc. Audited Financial Statements were used to gather financial data. At the end we can conclude that though there is a correlation between financial and ESG data of a company, but due to certain limitations, error percentage is very high. End result of this Analysis shows that it is possible to perform as well as much better to perform Triple bottom line analysis instead of relying on ESG risk ratings to eliminate existing errors as well as it gives a direct relation with the financial status of the company.
Keywords: ESG, Triple Bottom Line Analysis, Sustainable Finance, TCFD, S&P50.
