ESG

Environmental, Social, and Governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments. These criteria help to better determine the future financial performance of companies (return and risk).

The environmental aspect examines how a company performs as a steward of nature. This includes how it manages risks and opportunities related to environmental challenges such as climate change, resource depletion, waste, and pollution. Companies are evaluated on their environmental policies, practices, and impact.

The social component looks at the company’s business relationships. This involves examining how it manages relationships with employees, suppliers, customers, and the communities where it operates. Key areas include labor practices, product safety, and community engagement.

Governance deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights. It encompasses the structures and processes for decision-making, accountability, and control in a company, ensuring that it operates with integrity and transparency.

Investors increasingly consider ESG factors as part of their investment analysis and decision-making processes, recognizing that companies with strong ESG performance may be more resilient and better positioned for long-term success.