What is ESG?
Environmental, social and governance (ESG) is an analysis framework that measures and quantifies the degree to which an organization is operating in a sustainable manner.
- It refers to a collection of corporate performance evaluation criteria that assess the robustness of a company’s governance mechanisms and its ability to effectively manage its environmental and social impacts.
- These are non-financial factors investors use to measure an investment or company’s sustainability.
- Capital markets use ESG to evaluate organizations and determine future financial performance.
- The goal of ESG is to capture all the non-financial risks and opportunities inherent to a company’s day-to-day activities.
ESG Factors
The common set of ESG factors considered when evaluating opportunities, making decisions, managing investments, and engaging with companies to seek improvements in business practices and disclosure are:
What is pushing ESG in business?
- Consumers are increasingly becoming sensitive to the impact of what they buy on ESG.
- A tool to engage all stakeholders.
- Stringent regulatory environment in pushing the adoption of ESG practices and reporting.
- It is a moral issue as well as the reputation of the company.
- It is part of risk management and ensures the sustainability of the business. It is a strategic issue that needs to be addressed at the board level.
- Trade associations are pushing members for adoption.
- Listing requirement – listed companies required to adopt certain practices and report on them
How is ESG realized:
ESG is concerned with building wealth for the future; transparently (disclosure) showing a clear picture of the direction and progression of the company or organization.
The full spectrum of ESG covers a broad array of services including;
• Risk Management
• ESG Reporting
• Due Diligence
• Sustainable Finance
• Corporate Governance
• Government Investigation and enforcement
• Dispute Resolution