Why is ESG essential to humanity?
What is ESG (Environmental, Social, and Governance)?
ESG is the acronym for Environmental, Social, and (Corporate) Governance, the three broad categories of interest for what is termed “Responsible Investment (RI).” They are investors who consider it important to incorporate their values and concerns (such as social or environmental concerns) into their selection of investments instead of simply considering the potential profitability and / or risk presented by an investment opportunity.
Environmental factors relate to the company’s policies on, and interactions with, issues that affect the natural environment. This includes replacing polluting industry practices with recycling technologies, addressing climate change through decarbonisation, swapping conventional energy for renewable energy, changing out pesticides or genetically modified organisms (GMOs) with renewable agricultural practices, and better managing the extraction or use of raw materials in a plethora of ways.
Social factors broadly concern the corporation’s interactions with other societal interests. These issues typically include employee and labour relations, human and animal rights, certain forms of workplace diversity, and the procurement of the products or services that the company supplies.
Governance factors typically focus on the corporation’s structure and operation, and can include issues such as employee diversity, gender equality, gender variance acceptance, executive compensation, board member demographic diversity, political spending or lobbying, and management structure and policies.
We challenge you to think through these lists, relating them to your life and workplace and consider how much better your workplace would feel and perform (especially financially) if many of these points were equitably optimised.
Read more in our coming article about why ESG investing returns higher profits and de-risks business. Doesn’t that sound wonderfully logical?