ESG stands for Environmental, Social, and Governance. This refers to three primary factors in the sustainability, measuring, and societal impact of an investment into a business. With the analysis and utilization of these criteria, investors are better able to predict and understand the future potential financial performances and outcomes for companies. ESG can cover everything from climate change to a company’s labor practices, talent management, along with monitoring data security and product safety.
The criteria set by ESG is largely utilized by socially-conscious investors and shareholders alike to determine when to make investments into eco-friendly companies based on their initiatives and impact on the environment around the world. As the world progresses towards more green initiatives, shareholders look to ESG more increasingly in US and EU markets for fiduciary duty.
ESG CRITERIA BREAKDOWN
The following ESG criteria affect how a company will gain and retain funds for socially responsible investments.
ESG AND PROFIT
The above graph references the three pillars of criteria for ESG broken down. Investors look for high ESG ratings by determining how a company conducts its business and not solely off of profit margins alone. Companies that seek to pursue high ESG performance scores will benefit from the following:
When it comes to preparing your company for an ESG rating review, take all of the above into consideration. Moving towards a more environmentally friendly business model will benefit your business and the world in multiple ways. You will garner the attention of investors and leave a better mark on the environment.