Environmental Social and Governance ESG Integration into Enterprise Risk Management ERM.

Описание: I this video, I discuss environmental, social and governance (ESG) integrate with the enterprise risk management (ERM).

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0:00 Introduction
This video explains Environmental, Social, and Governance (ESG), a framework companies and investors use to evaluate a company's impact and practices in these three areas (0:21).

Here's a breakdown of the key points:

What is ESG? It stands for Environmental (how a company acts as a steward of the natural environment, e.g., energy use, waste management) (2:37), Social (how a company manages relationships with employees, suppliers, customers, and communities, e.g., working conditions, community engagement) (3:34), and Governance (how a company is led and controlled, e.g., leadership, executive pay, internal controls, shareholder rights) (4:54).
Why is ESG important? Investors are increasingly interested in companies that score high on ESG criteria, believing that sustainable businesses offer better long-term returns and signal good management (0:44, 1:19).
Integrating ESG into ERM: The video emphasizes that ESG risks should be integrated into a company's existing Enterprise Risk Management (ERM) framework, rather than being treated separately (7:18). It then details how ESG considerations apply to the five components of ERM:
Governance and Culture: Ensuring leadership and company culture prioritize ESG management (8:01).
Strategy and Objective Setting: Incorporating ESG goals into the company's strategic plans and objectives (12:33).
Performance: Developing systems to measure, monitor, and manage the company's ESG performance (15:05).
Review and Revision: Regularly reviewing and updating ESG risk management frameworks to adapt to changes (18:13).
Information, Communication, and Reporting: Establishing clear processes for collecting, analyzing, and communicating ESG information internally and externally (20:47).

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Enterprise Risk Management (ERM) is a strategic business discipline that supports the identification, assessment, and management of the full spectrum of an organization's risks, including those related to environmental, social, and governance (ESG) issues. ESG risks can have a significant impact on an organization's financial performance, reputation, and long-term sustainability. ERM frameworks are increasingly incorporating ESG considerations due to the growing recognition that such issues can be material to business success.

Here's how ERM can be applied to ESG risks:

Identification of ESG Risks:

Environmental Risks: This includes risks from climate change, resource scarcity, pollution, and changes in environmental regulation.
Social Risks: These encompass risks related to human capital (e.g., labor management, safety), community impact, and social license to operate.
Governance Risks: These are associated with corporate governance practices, including board composition, executive compensation, and business ethics.
Assessment and Prioritization:

Quantify the likelihood and potential impact of ESG risks on the organization.
Prioritize the risks based on their significance to the organization’s strategic objectives, taking into consideration the company’s risk appetite.
Integration into ERM:

Ensure that ESG risks are integrated into the overall ERM framework, rather than treated as a separate or parallel process.
Align ESG risk management with the organization's overall risk management processes and strategic planning.
Mitigation Strategies:

Develop and implement strategies to mitigate ESG risks. This may include adopting more sustainable practices, improving governance structures, engaging with stakeholders, and investing in community development.
Include the use of insurance, hedging, and other financial instruments where appropriate to transfer or finance risk.
Monitoring and Reporting:

Establish key risk indicators (KRIs) and metrics to monitor ESG risks over time and report progress to stakeholders.
Regularly report on ESG risks and management strategies in public disclosures, such as annual reports and sustainability reports, following frameworks like the Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB), or Task Force on Climate-related Financial Disclosures (TCFD).
Stakeholder Engagement: