COP26: ESG in America

COP26 takes place this week in Glasgow and we asked industry experts what they were expecting from the event.  Mark Sherlock, head of US equities at the international business of Federated Hermes, says many Americans are aware of the urgent need for action.

American business and the notion of the ‘profit motive’ have been inextricably linked for as long as anyone can remember. It is therefore perhaps unsurprising that individuals and corporates have been suspicious of ESG as a lens through which to judge the health of a business.

It is hard to argue against better corporate governance – and social benefits also accrue when management is encouraged to focus on its people. The environmental considerations are perhaps the most controversial, yet arguably the most important. Short-term benefits are not always obvious and yet a significant majority of Americans believe that urgent action is needed to avoid catastrophic changes to climate and habitat over the longer term.

Adoption of ESG is perhaps better seen as a journey rather than an event. A steady pace of progress can still be achieved, while minimising the immediate threat to livelihoods and allowing for a period of adjustment.  The important point here is that we take the first steps in turning the single point metric of profit into a more balanced and sustainable assessment of businesses.

© 2021 funds europe

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