Since Professor Nicholas Stern published a seminal book in 2006 in which he dared to estimate the economic cost of climate change, and ten years later the Paris Agreement was reached to curb the rise in global temperature, the fight against climate change has, in recent years, focused the efforts of governments, regulators and supervisors, investors, companies and citizens.<\/p>\n
However, as it has become clear that the transition to a decarbonised economy requires greater attention to the most vulnerable segments of the population affected by price increases or by the green transformation of certain economic activities\u2014with the consequent impact on employment\u2014social aspects have taken on relevance equivalent to that of the environment. In this way, ESG criteria (enviromental, social and governance<\/em>) have moved to the centre of the debate on sustainability, and the essence put forward by Professor John Elkington has been revived, when 25 years ago he coined the term “Triple Bottom Line<\/em>” to represent a sustainability framework in which a company had to find a reasonable balance between its environmental, social and economic impact. <\/p>\n The complex regulatory framework put forward by the European Union to promote the mobilisation of private capital towards sustainable projects and mitigate deception (greenwashing<\/em>) has not prevented Russia\u2019s war in Ukraine from prompting a rethink of priorities, placing, as Larry Fink, CEO of BlackRock, has suggested, energy security above the commitment to sustainability. A debate fuelled by the European Commission\u2019s decision to consider gas and nuclear energy as taxonomically green activities. All of these effects were compounded at the beginning of this summer when an alleged case of greenwashing<\/em> involving the German asset manager DWS became known, and they have culminated in a debate about the validity and integrity of ESG criteria. <\/p>\n Concerns arising from the use of ESG criteria as investment or risk-management tools have increased as this concept has gained support and traction. Among them, many analysts argue that it is a complementary and occasional concept within a company\u2019s strategy, but that it ends up distracting rather than generating the value it is assumed to create. In addition, it is a concept that cannot be measured objectively, among other reasons because there is neither data of proven quality nor a consensus reporting standard that allows comparison of one company\u2019s ESG performance against another\u2019s. The European Commission and regulators are committed to building a set of rules to mitigate this shortcoming but, even if they succeed, there is not sufficiently robust evidence to validate whether there is truly a direct relationship between financial performance and adequate ESG performance, so the incentive to bear the associated cost is also unclear. The difficulty of resolving these challenges has therefore revealed a certain degree of distrust among some analysts and investors regarding sustainable investment based on ESG criteria. <\/p>\n However, what is often overlooked when talking about sustainability is that preserving a company\u2019s long-term value depends on management. Sustainability is not only about complying with current regulation or demonstrating business progress through reports full of indicators and metrics that are difficult to compare across companies. Sustainability requires creating a positive impact, which means managing through a lens in which ethics, commitment and strategy are combined and, to that end, it is necessary to design robust governance models and define objectives and indicators that, with transparency and traceability, verify that the organisation is moving in the right direction. This requires involving the board of directors and the entire senior management team, assigning responsibilities where they belong. Therefore, ESG performance necessarily depends on strategic sustainability management and on an understanding<\/em> and culture policy throughout the company, so that governance once again stands out as the most relevant attribute of this transformation. <\/p>\n However, when analysing ESG factors, this “G” element is often forgotten amid considerations of climate risk and social implications. For this reason, it would be more intuitive to anticipate the GuES effect (Governance, understanding, Enviromental and Social<\/em>) than to continue insisting on applying ESG criteria in the way currently being proposed. As Julio Cort\u00e1zar said, it is not the same to be a Latin American writer as to be a writer who is Latin American. Even if the ingredients are the same, giving greater importance to governance, management, responsibility and commitment, business ethics, consistency of actions, a company\u2019s strategy and culture is, on many occasions, more important than filling in a set of indicators or colouring in the degree of transformation of an economic activity. <\/p>\n In this regard, Spanish banks have decided in recent years to integrate sustainability into their corporate strategy and to elevate sustainability leaders within the organisational hierarchy, understanding that this cross-cutting function must play an essential role in the cultural transformation of institutions. For most Spanish banks, governance is a concern as relevant as environmental or social issues. In fact, most boards of directors linked to the sector are sensitive to compliance with climate commitments and regulation but, above all, to their role as bulwarks of sustainability. <\/p>\n