What is ESG? Here is why firms planning for IPO should take note of it

Any company planning to launch its initial public offering (IPO) must keep in mind certain details before they start the process. From key financial metrics to a draft red herring prospectus, investors are looking out for every detail about a company before they decide if they want to invest in its public issue. These days, another metric is gaining traction- environmental, social, and governance (ESG) matters. It has been noticed that ESG compliant companies performed better during the pandemic period. It has also been seen that many investors now expect organisations to be proactive when it comes to ESG policies. In this changing business environment, let’s look at how ESG can impact the IPO of companies: What exactly is ESG? ESG means the company’s outlook on environment, social and governance matters and how it is progressing on these three metrics. There is no fixed list of ESG issues. But the terms broadly imply sustainable use of resources (environment), relationships with employees and communities (social) and standards for running the company (governance). It basically highlights the risks a company face in these three sectors and what steps it has taken to minimise them. Relationship between IPO and ESG: A company that is proactive in declaring its ESG policies will receive greater attention from bidders in the pre-IPO stage. A good ESG rating will have the following effects on a company’s IPO: ― It will boost visibility. ― It will make the company more competitive. ― It can help you attract more investors, as well as more talent or any future recruitment drives. ― It will minimise negative attention from activists. An IPO ESG assessment takes a company’s commitments and progress on these metrics into account. Disclosing the ESG compliance can increase a brand’s value. It can also attract more ethically-minded investors. What is the way ahead? A firm planning to go public, must pay attention to its ESG policies, and overhaul it, if needed. The company also needs to ensure that it follows up on its ESG pledges and inform all stakeholders about its progress as well. Read all the Latest News , Trending News , Cricket News , Bollywood News , India News and Entertainment News here. Follow us on Facebook, Twitter and Instagram.