Ask Beth: Why is sustainability and environmental social governance (ESG) important to compliance officers?

Encourages Gapless Governance

ESG is important in identifying and correcting governance gaps within a given investment since it allows gatekeepers to analyze factors of an investment through a different set of criteria. Gatekeepers shouldn’t rely solely on ESG to judge the health of an investment, they should use it as a tool in identifying any inaccuracies and to confirm that all investment standards have been followed.

Prevents Fraud

It is already an essential responsibility for compliance officers to be proactive with fraud prevention, so why utilize ESG? Principals of ESG are similar in nature and allow compliance officers to assess the credibility of claims through testing the investment’s supporting materials and recorded data.

Sustainability and ESG Improves business decision-making and aids in the overall internal health of a company.

A duty to protect information reinforces an importance to avoid unpredictable risks. ESG teaches compliance officers to adopt a more goal-oriented, systematic approach when maintaining a business’ compliance. With ESG, managing risks become more in line with managing a project: solution oriented, adhering to deadlines, and continually familiarizing themselves with all claims and materials to ensure accuracy and deter fraud.

For more information on sustainability and ESG, review my recent Fordham Law Review Article