ESG: Cost or Value Driver?

In my recent conversation with Gwen Safa, Global Head of Sustainable Corporate Solutions at Barclays Investment Bank, in the webinar “Sustainability: Competitive Advantage or Regulatory Burden?”, we discussed a question that has stuck with me:

Is ESG a cost or a value driver?

It’s not a new question, but it’s revealing, because it shows how much the conversation has shifted. A few years ago, ESG was often seen as either a bonus or a burden. Today, it’s neither. And that’s precisely what makes it interesting.

ESG Is the New Cost of Entry

Across both public and private markets, ESG is no longer viewed as a competitive advantage. It’s a baseline expectation. Fundamentals like governance structures, reporting protocols, regulatory alignment, and sustainability disclosures are now considered standard operating procedure.

For companies approaching an IPO or seeking institutional capital, this means one thing: if you’ve checked the boxes, don’t expect applause. ESG compliance no longer earns bonus points; it simply keeps you in the game. Investors will notice if it’s missing, but they won’t reward you just because it’s there.

That’s not a dismissal of ESG. It’s a signal of maturity. Markets have evolved, and so have expectations. The absence of ESG practices is now a red flag. Their presence is table stakes.

Who’s From Compliance to Contribution: Where ESG Gets Strategic

Where ESG does create value is when it’s embedded, not just documented.

This is where the conversation shifts from compliance to strategy. ESG becomes meaningful when a company’s products, services, or operating model actively contributes to long-term sustainability outcomes, whether accelerating the energy transition, enabling supply chain transparency, or improving resilience to climate and regulatory risks.

In these cases, ESG is more than a report. It’s a lens through which companies make decisions, allocate capital, and create value.
That distinction matters. Investors increasingly look for ESG utility, not formality.

Capital Follows ESG That Works

We’re already seeing this shift reflected in capital flows. Companies with credible, integrated ESG strategies are drawing more interest from Article 8 and Article 9 funds. This isn’t just box-checking capital, it’s actively seeking alignment with sustainable, future-oriented business models.

What’s changed is that investors assume you’ve handled the basics. Now they’re asking:

• • What is ESG enabling in your business?
  • How does it reduce material risks?
  • How does it support long-term value creation?

In other words, ESG doesn’t earn you extra attention by existing. It earns it by performing.

ESG Is Quiet - Until It's Missing

This evolution also reframes how ESG is discussed in investor conversations. Where there was once a long list of diligence questions, there’s now quiet confidence or concern.

If the fundamentals are in place, ESG may not even come up in detail. That silence isn’t a red flag; it means ESG has moved from the spotlight to infrastructure. From headline to hygiene.

But if something’s off, if disclosures are patchy, if governance looks weak, or if risks aren’t clearly addressed, that silence disappears fast.

Proving ESG Works Is the Next Chapter

So, is ESG a cost or a value driver?

It’s both, and it’s neither. It depends entirely on how it’s used. ESG can’t guarantee returns, and it won’t replace operational discipline. But when embedded into how companies operate, into procurement, product development, capital allocation, and risk management, it becomes a signal of resilience and a magnet for forward-looking capital.

The next challenge isn’t proving ESG exists. It’s proving it works.

That’s not a burden. And it’s no longer a bonus.

It’s the new baseline for doing business.

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