Environmental, social and governance criteria, represented by the acronym ESG, are among the priorities of the boards of directors in 2021 for companies in Argentina, Brazil, and Chile, according to a report by EY consulting. The theme is the third most important aspect of the 2021 agenda of 48% of board members in the region.

According to the document, climate change is, among the ESG themes, which is at the center of the debate, especially the emissions of gases that cause the greenhouse effect.

“After several investment funds’ position on ESG issues, with emphasis on climate change, we saw, throughout 2020, a huge movement of the private sector towards carbon neutrality”, states the report. According to the document, in this period, ESG investment strategies surpassed US$1 trillion for the first time. "The transition processes to a low carbon economy already demand a lot of investment and it is known that the cost of not doing anything is greater."

In this scenario, the need for an organization to have ESG indicators arises. It is on them that the investors base their decision-making. “Companies need to rebuild trust with society and, collectively, be seen as part of the solution to the main challenges facing our planet and society,” warns EY. "It is necessary to increase trust among shareholders and other stakeholders through greater transparency of reporting on ESG, in a consistent and comparable way."

Boards of directors that guide organizations' strategies, have a role in this agenda. EY recommends some reflections:

• How does the board follow regulatory and market trends related to ESG to perceive next-generation sustainability risks and opportunities in relation to the business?
• Does the board have visibility into how the market and investors assess the company's ESG practices and performance, and how the company is impacted by current trends in ESG investment and management?
• How does the company's strategy and corporate risk management address the needs of key stakeholders, addressing financially material environmental and social factors and generating competitive advantage?
• Is the company doing scenario planning to test the sustainability of its business model against ESG risks and opportunities?
• Does the company have clear ESG goals and commitments that are communicated internally and externally? How do these goals align with industry leaders and similar companies, and how does the executive compensation program help deliver results?

“It is important to note that board members continue to be required in relation to new skills and attributions, in the sense of directing greater efforts to the demands and realities that surround their respective companies. The difference is that now, because of the pandemic, all this has intensified and become more evident, which requires even more attention from the collegiate”, explains Carolina Queiroz, study coordinator and executive director of Family Business at EY in Brazil and Latin America.