Want to know more about ESG? Here are our most frequently asked questions.
What Is ESG?
Environmental, social, and corporate governance (ESG) is a framework for measuring the sustainability and ethical impact of an investment in a company or business. The ESG criteria are typically defined by environmental concerns such as climate change mitigation; environmental protection; resource depletion; environmental degradation etc., plus social impacts like human rights violations or child labor practices.
Why Is ESG Important?
Companies that embrace ESG criteria perform better financially as compared to their peers. Investors are becoming increasingly concerned with where they put their money and want to know what environmental impact it's having on the world. They also don't want to invest in companies who have a negative environmental or social record. ESG initiatives are also becoming increasingly more important in the hiring and talent domain. Employees are hyper-aware of the environment they live in and want to work in organizations that drive meaningful change and add value to solve issues of the global community. Companies who lack the ability to show how they're contributing to ESG solutions will miss out on top talent.
Types of Environmental, Social, & Governance (ESG) Criteria?
Environmental criteria include environmental protection, resource depletion and environmental degradation. Social criteria include human rights violations, child labor practices in the supply chain, equal opportunity issues and workforce diversity etc. Meanwhile, corporate governance refers to a company's management structure that is designed to protect shareholders' interests. This includes things like executive compensation policies and insider trading rules.
What Are The Benefits Of ESG?
There are many benefits to environmental, social and corporate governance (ESG) criteria. One of the most significant being the ability for companies who practice ESG policies to attract more investors due to the lower level of risk in comparison to companies who don't have these standards in place. This means that investors will pay higher prices on shares. In addition, companies will be able to attract a larger pool of top talent.