Risk management

5 Reputational Risks to Revenue without Sustainability Strategies

If a company decides to take a pass on sustainability strategies, it behooves sustainability champions to forewarn them that they may be jeopardizing their reputation with their customers. That reputational risk can quickly translate into lost revenue if customers decide they are more comfortable doing business with competitors. It helps to size the potential revenue at risk by estimating its impact and factoring it by the probability of it occurring within the next three to five years. Assuming the company’s current revenue is $500 million, let’s look at a methodology for sizing five reputational risks to revenue: Read More

4 ESG-Friendly Findings about Borrowing Rates

In my last blog, I outlined three concerns that lending institutions have about companies with poor environmental, social, and governance (ESG) track records. First, environmental practices may expose borrowers to expensive legal, reputational, and regulatory risks that could jeopardize their solvency. Second, lenders want to ensure they are not stuck with the borrower’s current and past environmental liabilities if the borrower defaults on the loan. Third, lenders are wary of risks to their own reputations if the public perceives they are abetting the borrower’s irresponsible corporate behavior. For these three reasons, laggard companies with poor ESG track records may find they pay a higher rate for their borrowed capital. The Social Investment Forum’s 2010 Moskowitz Prize for scholarly research on socially responsible investing was awarded to Rob Bauer and Daniel Hann for their paper, “Corporate Environmental Management and Credit Risk.” In it, they analyzed 1996 to 2006 data on the environmental profiles of 582 U.S. public companies and their associated cost of debt. They found: Read More