finnCap has launched a new handbook and toolkit aimed at helping small cap firms improve their ESG credentials, amid growing investor awareness of sustainability.
According to the broker, 90% of millennials want to invest on an ESG-compliant basis, with 84% already doing so, making compliance with ESG vital to ensuring a pipeline of future investment for small and midcap firms.
With current ratings efforts by indexes and platforms skewed towards larger cap firms, the assessment of ESG-compliant small and mid-cap companies often goes “unrealised,” Finncap said.
In response, it has constructed a 15-point scorecard including measurable targets and advice on how those targets can be achieved for SMEs to demonstrate how investable they are from an ESG standpoint.
According to finnCap’s analysis, there are three key recommendations firms can implement to highlight their credentials to investors. These include obtaining key environment data points; applying the most important policies, including environmental, discrimination and ethical practices; and promoting more board equality.
Raymond Greaves, head of research, finnCap, said: “The pace with which environmental and ethical factors are being factored into investments globally has meant that small and medium sized companies will increasingly be analysed through an ESG lens. Using our scorecard will help small and medium sized firms remain attractive to investors and fund managers in a post COVID environment where funding will be reserved, in large part, for companies that can systematically prove they have multiple stakeholder interests at heart and operate in a forward thinking manner.”
Sam Smith, CEO, finnCap, added: “Companies now recognise that ESG concerns are no longer simply a way to signal a company’s caring credentials – they are a fundamental part of sustainable business success. As we look to recover from the pandemic and restore economic growth, ESG should be a hallmark of our approach – ensuring that the growth that is delivered is more responsible, sustainable and for the benefit of all.”
