ESG
Term of the Day - 13 March 2024
Today’s Term is “ESG”.
ESG stands for Environmental, Social, and Governance, which refers to the three central factors in measuring the sustainability and ethical impact of an investment or a company's operations. It is a framework that helps evaluate how an organization manages risks and opportunities related to these three key areas.
The concept of ESG emerged from the idea that companies' actions affect more than just their profit margins - they also have an impact on society and the environment. Integrating ESG factors into decision-making processes can lead to more sustainable and responsible business practices.
Key characteristics/features of ESG include:
Environmental factors: climate change, carbon emissions, pollution, energy efficiency, waste management, natural resource conservation.
Social factors: human rights, labour standards, workplace health and safety, employee relations, diversity and inclusion, community relations.
Governance factors: board composition, executive compensation, shareholder rights, business ethics, anti-corruption practices, transparency and accountability.
Growing demand from investors for companies to disclose and manage ESG risks.
Use of ESG criteria to evaluate companies' operations, supply chains, and potential long-term impacts.
Integration of ESG data into investment decisions and corporate strategy development.
Measuring and reporting ESG performance through standardized frameworks and ratings.
Promoting sustainable and responsible business practices across industries.
ESG emphasizes that an organization's performance should be evaluated based on a holistic view of its ethical, environmental, and social impacts, in addition to its financial returns. It represents a shift towards more conscious and stakeholder-oriented business practices.
