Introduction
Introduction
Environmental, social and governance (ESG) considerations have become integral to financial strategy, shaping investment decisions, risk management and long-term value creation. Regulatory frameworks such as the Global Reporting Initiative, Sustainable Finance Disclosure Regulation and IFRS Sustainability Disclosure Standards are enhancing transparency and accountability. Notably, 80% of global financial institutions now recognise ESG as a strategic priority, underscoring its growing importance in capital markets.
ESG integration is a key driver of financial growth, reducing risks and strengthening shareholder value. According to a 2023 Morningstar analysis, during a five-year period, funds with strong ESG ratings performed 3.5% better than their non-ESG counterparts. Effective ESG practices also improve brand reputation, operational effectiveness and regulatory compliance. However, given the financial and reputational costs of making false ESG claims, as evidenced by greenwashing scandals such as DWS Group's USD19m SEC settlement, transparency is still crucial. Retaining investor confidence requires effective ESG strategies, supported by strong governance and truthful disclosures.
As ESG factors become an integral part of financial decision-making, companies that proactively integrate sustainability will secure a competitive advantage. AI-driven analytics, ESG-linked credit ratings and the rise of impact investing are shaping the future of ESG-integrated finance. In 2024, global impact investing assets surpassed USD1.5trn, reflecting a shift towards stakeholder-driven capitalism.
Key Takeaways
Global sustainable investments reached 9trn in assets under management, growing by 20% in two years (GSIA 2022, Fig. 2).
99% of investors consider ESG factors in decisions, and 94% support appointing a chief sustainability officer for sustainability (EY report).
ESG-rated funds outperformed non-ESG peers by 5% annually over five years (Morningstar, 2023).
Unilever’s sustainable brands grew 69% faster than its portfolio, driving 75% of total growth (Fig. 5).
Sustainable finance products exceeded USD7trn in 2023, led by USD872bn in bond issuances (UNCTAD 2024, Fig. 7).
Apple’s 7bn green bonds financed 50 projects, cutting 2.88m metric tons of CO₂e and adding 700 MW in renewable energy.
72% of companies halted acquisitions over ESG red flags in 2024, up from 49% in 2022 (Deloitte Survey).
HSBC’s climate models show severe scenarios increase equity and bond volatility.
Conclusion
The integration of ESG principles into financial strategy has transitioned from a peripheral consideration to a fundamental pillar of global finance. The magnitude of sustainable investment, valued at USD21.9trn and expanding by 20% in the recent years, demonstrates that ESG is now embedded within the fabrics of capital markets. Investors’ sentiment strongly reinforces this shift, with nearly all institutional investors incorporating ESG into decision-making and demanding accountability from corporate leaders. Empirical evidence substantiates the financial advantage, as ESG-focused funds have consistently outperformed traditional portfolios, while case studies such as Unilever’s SLP have illustrated how aligning sustainability with product innovation drives superior growth and consumer loyalty.
How Acuity can support
At Acuity, we can undertake a preliminary assessment of a firm’s ESG maturity and develop informed strategies that enable shared value creation for the firm’s salient stakeholder groups. We can support the development of a value creation model that establishes the interrelationship between capitals of a non-financial nature and their contribution towards sustainable financial value creation. In short, we can help establish concise strategies that promote sustainable financial value creation through the implementation of the firm’s ESG strategies.
About the Authors
Dr Biswaraj Ghosh is a key member of Acuity’s Corporate and Consulting vertical and oversees project execution and delivery for clients across multiple sectors covering Climate Change, and a range of ESG services. He possesses several functional expertise including solving sustainability-related issues, developing decarbonization strategies, stakeholder engagement, ESG risk assessment, materiality assessment, climate management, sustainability management, target setting, KPI design, etc. through qualitative & quantitative research. He is a Copyright holder (UK and India) for the indigenously developed Sustainability Management Model as part of his PhD thesis. He is also a published author, an international ESG talk show expert..Show More
Adammya Kulshrestha worked as a Consulting Intern at Acuity Knowledge Partners, where he contributed to high-impact research projects within the ESG and Strategy domains. He supported client deliverables by conducting extensive secondary research. During his time at Acuity, he contributed towards thought leadership proactively. His work showcased a strong integration of financial analysis with sustainability strategy, tailored to meet dynamic client needs across geographies.
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