ECO-mmunity

Are you falling behind the current trend of Environmental, Social, and Corporate Governance (ESG)? Does your company believe in it at all? ESG refers to the central factors in gauging the sustainability and societal impact of an investment in a company or business based on return and risk. But why is this important? This is a vital aspect to consider for the performance of your corporation when faced with the current shift of paradigm.


With the government regulations prioritising high ESG corporations, less aligned sectors such as oil and gas become more tenuous for investors. Why not go with strong ESG companies? Also as the generation below gradually begin to take the helm of corporations and have a bigger impact on business, topics like environment, sustainability and human rights are more important than ever. As a financial organisation, money is to be made from aligning yourself with these views. As a result of this shift in priority towards topics such as climate change, human rights and employee relations, it is paramount to bring these pressing matters to the forefront of your company’s agenda.

Although gas and oil tend to come to mind first when considering corporations at odds with ESG, it is not entirely the case. It is important to note that a substantial portion of fossil fuel usage comes from the running of data centres. And this only increases each year further into the internet age we get. The ESG level of a company reliant on large scale data centres, such as finance and computing, can therefore be put in jeopardy. The gargantuan demand for power produces some worrying statistics. A particularly dizzying figure was cited by Aberdeen Standard Investments in a recent article of the involvement of data centres in climate change. The article states that the 5 billion views on Justin Bieber’s YouTube video for Despacito requires as much power as 40,000 US homes would use across a year. How can such astronomical power usage ever reflect well in ESG?


Well worry not, there’s no need to stop watching Justin Bieber videos. The article goes on to cite examples of successful attempts to curb the environmental impacts of data centres. Equinix; a real estate investment trust, managed to double their portfolio across 5 years. Despite operating over 200 data centres, they boast a commendable 92% usage of renewable energy. This is huge progress from their initial 33% just half a decade prior, and it sets a relieving precedent for companies operating with large scale data centres. Although it may seem like an uphill struggle, staying in line with the credo of ESG is within reach.


Such a task is not as arduous as it may seem at first, but as a SimCorp user what can be done to ensure a difference? Firstly you can make sure your system is running optimally and efficiently and optimise use of underlying software within your organisation. Another intuitive way this can be done is by using SimCorp to help you define investment strategies for your portfolios that invests in companies that hold ESG as a prime focus. The more focus on ESG, the higher the value of company shares and the lower of non ESG shares. This is not only going to raise the ratings of your portfolios, new and existing, but will also attract clients who are environmentally conscious and progressively minded.


To keep ESG in the forefront of discussion within your organisation is to make sure you remain ever trusted and sought after by clients and investors. Dimensional Community will help align your company more with ESG and ensure you reap the rewards of staying in line with the new values using Dimension.