Environmental, social, and corporate governance (ESG): These are the three central factors that are used in measuring the sustainability and societal impact of any investment in a company or business.
Environmental factors consider how a company performs as a steward of the natural environment. This includes how it reduces its carbon footprint and greenhouse gas emissions, conserves resources, and develops and uses environmentally friendly technologies.
Social factors consider how a company performs as a member of the community in which it operates. This includes how it treats its employees, the diversity of its workforce, its relationships with stakeholders, and its impact on local communities and society at large.
Corporate governance has to do with the systems and processes by which a given company is directed and controlled. This includes the board of directors, executive management, and internal controls. It also includes the company’s approach to risk management and transparency.
ESG factors are increasingly being used by investors to evaluate the long-term sustainability and ethical impact of their investments.
Many investors believe that companies with strong ESG performance are more likely to be financially successful in the long run, as they are better equipped to manage risks and opportunities and to attract and retain top talent.