Impact of the ESG Principles on the Corporate Financial Strategy

Abstract

In conditions of uncertainty, the financial strategy acts as an effective tool for a long-term management of corporate finance. That is why, developing this strategy, it is extremely important to take current market trends into account, in particular the promotion of ESG principles. The purpose of the article is to develop a set of practical recommendations aimed at simplifying the integration of ESG principles and overcoming the above barriers. This article discusses the trends associated with the growing importance of responsible investment and sustainable development and determines the level of activity of corporations in the Russian Federation in this area. The Green Bond Market trends have been researched; the reasons for the increased interest in financial instruments presented on this market have been determined. The dynamics of transactions with green bonds for the period of 2018–2021 has been studied, the lag of companies in the Russian Federation from the global trend has been demonstrated. Examples of several Russian corporations seeking to strengthen their positions in international ESG ratings have been considered. In addition, positive aspects for the corporate development, achieved by following the goals of sustainable development have been identified, and barriers that arise in the way of the dynamic ESG transformation of the corporate sector have been identified. Thus, taking ESG principles into account developing a corporate financial strategy can bring significant benefits in terms of maintaining financial stability, ensuring a more stable cash flow, reducing risks, increasing business attractiveness, both from investors and consumers, as well as increasing competitiveness and efficiency of financial resources formation. The insufficient degree of transparency of non-financial information, the lack of uniform standards for its provision, the subjectivity of the assigned ratings, and the low level of competence of Russian entrepreneurs in the field of ESG are highlighted among the most significant barriers.