ESG and Sustainability: keeping the momentum

Joost Notenboom, Head of ESG and Sustainability at Omnes, shares his thoughts on the connection between financial performance and ESG integration, which lies at the heart of Omnes’ investment strategies.

The market shows us in various ways that a company’s financial value is more and more connected to its performance on environmental, social and governance criteria. Individuals and organizations have increasingly clear roles in addressing global challenges such as climate change, biodiversity loss, social inequality and business resilience, and interests are converging.

ESG is becoming a key selling point
Consumers and clients value co-benefits more than they used to. In the renewable energies sector, buyers of green electricity are increasingly looking for double materiality, taking into account environmental and social impact. We see playing fields are being levelled and social impact business cases becoming more compelling. Putting a fair price on carbon intensive goods (CBAM) or shifting the burden of proof on products suspected to be made through deforestation (EUDR) or forced labour (EUFLR) are recent developments pointing to ESG becoming a fundamental component of value
protection and value creation. 

An indicator of an organization’s overall maturity
For investors, this outlook of improving the top- and bottom-line of the company is positive. Our own M&A advisors tell us that the market is starting to regard ESG maturity as an indicator of an organization’s overall maturity. Similarly, lenders are also increasingly factoring ESG performance into their loans through interest rate discounts or premiums. We see this happen during the financing of projects or when our companies negotiate a corporate loan, but also when we ourselves consider bridge financing when managing our investment funds. The aim is to align interests and encourage the adoption of quantitative targets in areas such as diversity and inclusion, workplace health and safety, and reductions in the use of electricity and water, and the production of waste.

Government support and tougher regulations
Recent European regulations – the SFDR, the EU Taxonomy, CSRD – have led to significant advances in the way sustainability is being considered. We see national governments, when translating these directives from Brussels into their national law, look for practical convergence of various agendas. For example, encouraging developers to make biodiversity a more integral part of renewable energy projects ties together both the climate agenda from COP21 and the biodiversity agenda from COP15.

Maintaining progress towards a just transition
Whereas there is an increasing alignment between ESG performance and financial value, we need to remain aware of the ecosystems, in the broad sense, on which our businesses depend. As investors, our responsibility is to continue developing long-term partnerships with our entrepreneurs, helping them to achieve sustainable growth in the fields of renewable energies, sustainable cities, deeptech and co-investments. We show our commitment by making robust ESG criteria an integral part of all stages of the investment process.

First published in Scope Spring 2024