With ESG regulations changing, clean energy companies are under pressure to set sustainability targets – and achieve them.
In this article, Gaby Amiel, Sennen CEO and co-founder, looks at what clean energy companies should be doing to fulfil their ESG obligations and secure continued investment.
In 2021, with all eyes on the race to net zero and climate change at the forefront of global concern, investment decisions are largely driven by the results of a company’s independent environmental, social and corporate governance (ESG) rating.
ESG offers a set of criteria investors take into account when making investment decisions. It is designed to measure a company's resilience to environmental, social and governance risks in the industry over the long term. It’s a valuable tool. According to recent studies, ESG portfolios now continually outperform traditional portfolios. And with changes to requirements set for early 2022, that rating is about to become even more essential.
The EU’s new Sustainable Finance Disclosure Regulation (SFDR), launched in March 2021, stipulates that sustainability risks must be integrated into the financial sector’s internal processes. The aim of this is to reduce greenwashing and force companies to make tangible moves towards sustainability goals in order to secure further investment.
In January 2022, a new SFDR reporting period will begin, which means EU companies are against the clock to get systems and processes in place to measure and achieve ESG ratings. While UK companies are not held to the same standard, it’s vital that they are aware of the regulations and expectations to continue trade and investment within the EU. As investors become more accustomed to investigating the sustainability data of funds, products and company cultures, UK businesses will need to provide the same level of commitment to remain competitive.
ESG is a tool for companies to better understand and manage their sustainability performance. It helps to set targets, balancing social, economic and environmental factors. Sustainability is absolutely about becoming environmentally viable for now and the future, but it’s more widely encompassing than that - it’s about privacy, health and safety, ethics and encouraging companies to be responsible businesses, engage with different stakeholders and support their communities.
Robert Baldwin, Master Limited Partnership Leader, PwC US
“Tech is key to the energy evolution.”
The rapid scale up of renewable energy is an urgent priority for sustainability. But, even for companies that work or invest in the renewable energy sector, there is much more that can and is being done. Leaders in ESG are working to improve biodiversity in asset locations, monitor waste management and to encourage sustainability in companies in their supply chains. In relation to the social elements of ESG, they are creating a stakeholder and community engagement plan, a robust complaints process, benefit funds for community projects and promoting local job creation.
There is a great challenge not only to act more sustainably but to track and measure the impact of what is being done. Much of the reporting can be achieved by technology, which more and more companies are investing in to drive change in sustainability, productivity and profitability. This tech now offers the ability to track emissions, deliver remote training, enhance health and safety and, in the case of Sennen, manage a portfolio of clean energy assets - from improving team efficiency and contractor performance to revealing insights that can enhance the value of assets.
To achieve their ESG goals, companies need to be able to harvest relevant metrics and provide a clear strategy for stakeholders. This is where innovative technology like Sennen comes in.
Sennen understands clean energy asset operations, including the supply chain for equipment and maintenance services. We help companies to set internal benchmarks for their sustainability and make accurate measurements of their progress, instead of relying on estimates and assumptions. Sennen also helps companies to address their sustainability performance throughout the operational lifecycle of an asset. Our customisable software allows businesses to manage their portfolios efficiently, delegate to contractors, receive live updates and understand underperformance. If companies are aware of the efficiency and longevity of their assets, they are better equipped to make improvements that can achieve ESG goals.
The change in ESG regulations marks a significant shift in approach for the financial sector, which will in turn force a shift in the way companies are sustainably operating in an ever more environmentally conscious age. Not only is this something that staff are more loudly demanding - in fact, “the workforce is increasingly made up of Millennials, for whom ESG is central” - but investors are too. Sennen is excited to be at the forefront of helping those in the renewables industry pave the way.