In a rapidly changing world, concerns about climate change, resource scarcity, social impact and chronic pollution are increasingly material to long-term investment decision-making. As a result, access to finance, whether debt or equity, now comes with broader governance expectations than ever before. The social, environmental and ethical responsibilities of cash are increasingly important for commercial banks, private equity funds and major projects.
Arcadis reviewed the sustainability practices and reporting of 50 leading financial institutions (both banks and equity investors) across the US and Europe. Our research found that cash used for debt provided by the global banks had more of a ‘conscience’ than the investor’s equity, with higher levels of Environmental, Social and Governance (ESG) reporting and transparency.
The findings indicate that not only will this trend continue, but for unwary borrowers it will also come with an unexpected ‘sting in the tail’. In particular, where Private Equity or Project Finance rely on international markets to achieve expected returns, it is now the ESG expectations of that debt, rather than of the investment partners themselves, that sets the rules.
For future equity funds and major projects to ensure easy access to debt finance for their investments, they need to start measuring ESG based on the metrics of their banks, not their investment partners, and do it early. This paper explains why, and how investors and their funding partners can satisfy these changing expectations - and realize the benefits of better business performance.
The world is a complex place, Arcadis helps you navigate this complexity by understanding the bigger picture. Click here to read some of our experts' latest thinking.
Arcadis is committed to providing a healthy and safe work environment for all our employees.