In this segment, we'll synthesize the full set of ESG factors into five pathways of materiality. That is I'll highlight five separate ways that ESG factors create value which cut across the individual elements survey. If we believe ESG factors are material then they have to show up in the financial statements of a company. We want however to get beyond the high level abstract arguments that they support intangibles, that they support corporate reputation and identify specific lines of revenues or costs on the profits and loss statement that are implicated. There are at least five specific ways in which ESG factors may impact the bottom line. First, better or worse ESG performance can attract or repel customers who pay more or pay less. The most rapidly and only growing segment in many consumer packaged goods sectors are those that offer sustainably raised farm to produce products. Next time you go to the grocery store see how many products have various green, eco, organic or other labels and ask yourself how you feel about those products relative to other products lacking the same labels, and then compare the prices across those products. By contrast, stories about slave labor or harmful environmental consequences can quickly trigger customer defection into another brand. Unilever's water savings sunlight brand of dishwashing liquid exceeds its category growth rate by 20 percent in water-scarce markets. Wharton doctoral student, Tony Hay, has shown that the launch of a new sustainable brand or product line is a common strategic response to an ESG controversy or scandal among your competitors. But revenue growth is not always driven by customers alone. When governing authorities trust corporate actors, they're more likely to award them the access approvals and licenses that afford fresh opportunities for growth. For example in a recent massive public private infrastructure project in Long Beach California the for-profit companies selected to participate were screened based on their prior performance and sustainability. My own research on the valuation of mining companies also highlights that the social license to operate is a critical input into getting the next permit or license that enables growth and operations. The second pathway is costs. For building construction to data centers to manufacturing facilities, power consumption and waste disposal are all major costs that can be reduced through innovative design. Such design may be more expensive in the short-term but pay for itself in the years or sometimes months to come. Walmart, for example, has experienced dramatic cost savings from pressuring its suppliers to redesign packaging in a way that reduce waste at Walmart stores. They similarly save money by installing solar panels on the tops of many of their facilities because they didn't have to buy electricity from the local utility. FedEx is already converted 20 percent of its 35,000 vehicles to electric or hybrid engines thereby saving 50 million gallons of fuel. 3M has documented $2.2 billion in cost savings from its Pollution Prevention Pays Program over 45 years. This program included efforts to reformulate products, improve manufacturing processes, and redesign equipment as well as recycle and reuse waste from production. The third pathway focuses on a specific set of risks, those associated with regulatory or legal action. A stronger external value proposition can enable companies to achieve greater strategic freedom easing regulatory and legal pressures. Strength in ESG helps companies reduce the risk of adverse government action. It can also engender governments support. The value at stake maybe higher than you think. McKinsey analysis suggests that on average 1/3 of corporate profits are at risk from government intervention. Regulations impact, of course, varies by industry. For pharmaceuticals and health care, the profits at stake are about 25-30 percent. In banking, where provision on capital requirements regulation on banks that are too big to fail and customer protection are so critical, the value at stake is likely higher, maybe 50-60 percent. For the automotive, aerospace, and defense or tech sectors, where government subsidies among other forms of intervention are prevalent, the value at stake can even exceed 60 percent. Consider the case of tech where Uber and Lyft business model depended on implicit deregulation of local transportation markets but arguably failed to account for the possibility of regulatory backlash in London Paris and other major metropolitan areas. Greater attention to the safety and welfare of its contract to drivers may have costed more in the short-term, but help to mitigate this downside regulatory risk. The fourth pathway focuses on employees and employee productivity. A strong ESG proposition can help companies attract and retain quality employees, enhance the motivation of those employees by instilling a sense of purpose within them, and increase productivity as a result. Employee satisfaction is positively correlated with shareholder returns. For example, London Business School faculty member Alex Edmonds has found that the companies that make fortunes, 100 best companies to work for, generated 2.3-3.8 percent higher stock returns per year than their peers over more than 25 years. Research by my Wharton colleague Adam Grant has shown that workers who were in contact with customers that benefit from their labor are more motivated and more productive as a result. My Wharton colleague Claudia Gartenberg has similarly shown financial benefits and companies with clarity as to their corporate purpose. To the extent that a company's output is meaningful and societally beneficial and job design and company messaging reinforced that it may be possible to get more out of your workforce and even pay them less. How can technological innovation into production processes not only improve efficiency but also create connections between employees and customers and or highlight the purpose of a company to its employees. Consultancies are increasingly offering their employees the opportunity to work on short-term pro bono projects as part of their job rotations. According to research from University College in London professor Christiane Bode, such product projects typically have excess demand particularly from the best employees within these consultancies even though they pay less. Just as higher ESG performance and a sense of higher purpose can inspire your employees to perform better. A weaker ESG proposition can drag productivity down. The most glaring examples are the strikes, worker slowdowns, and other labor actions that could occur within your organization. But it's worth remembering that productivity constraints can also manifest outside of your company's four walls across the supply chain. Primary suppliers often subcontract portions of large orders to other firms or rely on purchasing agents and subcontractors to manage loosely sometimes with little oversight over workers health and safety. Efforts by multinational corporations to monitor and improve supplier conditions can thus be conceived of as farsighted efforts to ensure the sustainability of their supply chains and their workforce as well as good reputation management. The fifth pathway, by which ESG factors can affect the bottom line is through the better management of assets over time. A strong ESG proposition can enhance investment returns by allocating capital to more promising and more sustainable opportunities. For example, renewables, waste reduction, and scrubbers. It can also help companies avoid stranded investments that may not pay off because of longer term environmental issues such as a massive right down to the value of an oil tanker in oil and gas field. My Wharton colleague Zeke Hernandez, Emily Feldman, and former Wharton doctoral student Kate Odziemkowska have shown that greater attention to ESG factors makes companies more attractive M&A targets. Whereas ESG weaknesses can preclude takeover interest or lead to investors walking away or paying less. By contrast, investments in technologies with negative environmental or social externalities are more likely to be written off or abandoned as the cost of their development and use becomes clear. Future bands or limitations on such things as single use plastics or diesel fuel cars in city centers will introduce new constraints on multiple businesses, many of which could find themselves having to catch up. One way to get ahead of that future curve is to consider repurposing assets right now. For instance, why not convert failing parking garages into uses with higher demands such as residences or daycare facilities. A trend we're beginning to see in many US cities. Foresight flows to the bottom line and leaning into the tailwinds of sustainability presents new opportunities to enhance investment returns. Tailwinds blow strongly in China for example. The country is imperative to combat air pollution, it's forecast to create more than three trillion dollars in investment opportunities through 2030, ranging across industries from air quality monitoring to indoor air purification and even in cement mixing. While not comprehensive, these five pathways account for the majority of potential financial impacts by which ESG hits the P&L. Understanding which pathways apply to your business or those in which you're invested is a critical element of ESG integration.