RALEIGH, N.C. (WNCN) — One type of risk is on the rise and businesses would be wise to pay more attention to it, a North Carolina State University expert says.

Environmental, social and governance — or, ESG — risks have become even more important over the past half-decade, said Bruce Branson, the associate director of the Enterprise Risk Management Initiative at the university’s Poole College of Management.

Those risks range from greenhouse gases and other environmental issues, to employee treatment and product recalls, to transparency and fraud prevention.

Corporations are “beginning to think more about how that is going to impact them, and how they are going to position themselves in the eyes of the investing community and their customers in order to make sure that they’re contributing to society, but also being successful for their owners or shareholders,” Branson said.

Failing to take it seriously could have consequences, Branson said.

BNY Mellon was fined $1.5 million by the Securities and Exchange Commission in May for making misstatements and omissions about ESG risks faced by the mutual funds its managed. 

Deutsche Bank was raided in May and its CEO resigned a month later claims that it sold ESG investments under false claims — a practice known as “greenwashing.” 

“Greenwashing, just as a term, is really this idea that corporations, or maybe more broadly, organizations really are talking the talk,” Branson said. “They’re trying to enjoy the benefits of being a good corporate citizen without really investing the necessary resources to actually accomplish the goals.”

It raises a key question: What can a business do about this now?

Branson says the key is open communication between risk managers, those who develop risk information, and senior leadership on the board of directors.

“There’s real opportunity to kind of leverage the work that these folks that have been working in the sustainability space, the work they’ve done, the product that they create … to kind of cross-fertilize a little bit better, to make sure that they’re talking to one another so that there’s a shared understanding of the more longer-term risks that most of these climate related risk exposures posed to an organization,” Branson said.

While much of Branson’s advice is aimed at businesses, consumers also ought to understand ESG risks so they can make informed choices about how they spend their money, he said.

“I think we’re going to we’re entering a period where it will be increasingly easier to access more and more of this information,” Branson said. “So as a consumer, you’ll be able to direct your purchasing power towards organizations that may be better fit your own personal beliefs.”