The use of ESG criteria (Environmental, Social and Governance) is increasingly common in the evaluation of investments, allowing the economic analysis procedure to be completed by an assessment that addresses the environmental, social and governance impacts affecting the Issuer Company.
In this way, the investor can direct the capital toward activities that, in addition to generating surplus value in economic terms, are careful not to compromise the ability of resources to generate value over time and the ability of future generations to meet their needs.
Thus, the process of analyzing proposed investment offers on Walliance, in addition to being based on the economic profile, also takes into account three criteria that define the sustainability of the investment itself.
Environmental: it refers to key resource efficiency indicators concerning renewable and nonrenewable energy use, use of raw materials, water resources and land use, waste generation, greenhouse gas emissions, and impact on biodiversity and circular economy.
Social: it refers to business activities with social and community impact, promoting equality and inclusion.
This criterion aspires to detect a company's respect for human, civil and labor rights, maintenance of appropriate working conditions, and compliance with labor laws.Governance: it concerns the governance responsibility of companies and the soundness of their structure. This criterion considers compensation strategies, diversity policies (gender, ethnicity, etc.), respect for meritocracy, shareholder rights, compliance with tax obligations, and anti-corruption.
Even in real estate, as one of the sectors most responsible for global emissions, environmental, social and governance factors have now assumed considerable importance.
For this reason, Walliance wants to continue to select projects that have a positive environmental impact, fit harmoniously into the geographical contexts in which they are implemented, intercept present social needs, and respect the possibilities of future generations. In order to make investors aware of the degree to which individual Issuers pay attention to ESG criteria, Walliance - although not a recipient of Regulation (EU) 2019/2088 on sustainability reporting in the financial services industry - prepares and makes accessible within the project page a project sustainability report, which reflects the results achieved in the ESG criteria questionnaire that is submitted to the Issuer Company by Walliance, prior to concluding the analysis of the project.
The 4 ESG profiles
Based on its analysis, Walliance attributes to Issuers, one of four ESG profiles, explained below.
Neutral: companies that put profitability above all other purposes, remaining neutral with respect to ESG and sustainability issues, but without causing harm to the environment or society.
Sustainable: societies that are sustainable, that is, that do not compromise, in the long run, the well-being of people and the environment by reducing or managing negative impacts.
Value creation: companies with potential to create value (in a positive sense) for people and the environment through their business activities.
Impact: companies that are created specifically to respond to a social or environmental challenge in an intentional, measurable, and additional way.
The level of attention Issuers pay to ESG factors is not a hindrance to Walliance's path to project selection, but only an opportunity for insight.