Published on 21 September 2018


Financial management debates on ESG fail to consider the social factor

In San Francisco, the Global Climate Action Summit and PRI in Person are taking place concurrently. On this occasion, responsible investors assert that a fair ecological transition will not be achieved by responding to climate and environmental issues alone: social dimensions must also be taken into account.

Consuelo Escorcia, a housekeeper at the Marriott Marquis hotel, spoke to 1,000 responsible investors.

On Thursday, 13 September, Consuelo Escorcia, a housekeeper at the Mariott Marquis Hotel, spoke to the 1,000 responsible investors gathered there for the PRI (Principles for Responsible Investment) annual meeting in San Francisco. This action alone symbolizes the rise of the “social factor”. Indeed, hotel staff could go on strike due demands from the hotel chain’s green program asking them for much more unpaid work. Their slogan: "One job should be enough!"

Responsible investors’ awareness of working conditions in this luxury hotel does not end there. With a roundtable entitled "Fighting modern slavery and precarious work" and a focus on the Sustainable Development Goals (SDGs), such awareness is one of the dominant themes of their annual meeting as it is a question of putting into perspective the global approach to not only environmental problems, but social one as well. These are problems that the current economy continues to pose as social inequalities continue to grow.

A just transition

Participating in this movement is the Ircantec initiative for a fair transition, which is taking advantage of this double meshing in San Francisco between the Global Climate Action Summit and PRI in Person to launch its investors guide. "Climate Change and just Transition" has about thirty pages that provide a guideline for actions that favour rethinking climate strategies by integrating social impact, whether by disinvesting from fossil fuels, such as coal, or by financing renewable energy.

"A new concern is rising: if we continue to neglect the social dimension of a low-carbon economy transition, this will generate a new series of risks in terms of political instability (rise of populism, with the election of leaders such as Donald Trump), economic disasters with collapsing sectors of activity (the automobile industry in Detroit or the production of American coal) and that will deprive us of the means to achieve our climate goals," write the authors led by Nick Robins, Professor in Practice for Sustainable Finance at the London School of Economics.

A financial sector error

A study shared by Standard and Poor's, recently published a concept note entitled "How Social Risks and Opportunities Factor Into Global Corporate Ratings". The study emphasises that social factors have a much lower impact on equity ratings than environmental and climatic factors. However, when social factors are material, they have an overwhelmingly negative impact on credit ratings, especially working conditions and product safety.

An endless reminder that environment and social factors are linked and wanting to put one against the other by believing that only environmental and climate risks can be quantified is a still a rampant error in the financial sector, even by the most knowledgeable. 10 years after the crisis, it's time to change the mantra!

In San Francisco, Anne-Catherine Husson-Traore, CEO of Novethic 



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