Environmental Social and Governance (ESG)

ESG stands for Environmental Social and Governance, and refers to the three key factors when measuring the sustainability and ethical impact of an investment in a business or company. ESG is a generic term used in capital markets and commonly used by investors to evaluate the behavior of companies, as well as determining their future financial performance. The Environmental Social and Governance factors are a subset of non-financial performance indicators which include ethical, sustainable and corporate government issues such as making sure there are systems in place to ensure accountability and managing the corporation’s carbon footprint.   ESG’s three central factors are:
  • Environmental criteria, which examines how a business performs as a steward of our natural environment, focusing on:
    • waste and pollution
    • resource depletion
    • greenhouse gas emission
    • deforestation
    • climate change
  • Social criteria, which looks at how the company treats people, and concentrates on:
    • employee relations & diversity
    • working conditions, including child labor and slavery
    • local communities; seeks explicitly to fund projects or institutions that will serve poor and underserved communities globally
    • health and safety
    • conflict
  • Governance criteria, which examines how a corporation polices itself – how the company is governed, and focuses on:
    • tax strategy
    • executive remuneration
    • donations and political lobbying
    • corruption and bribery
    • board diversity and structure

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