Environmental, social and governance (ESG) factors refer to three key criteria used to evaluate the sustainability of an investment.
They have become key drivers of value, proving that financial performance is no longer measured only in terms of market size and profit.
Environmental responsibility includes energy use, waste management, and climate change. Social responsibility includes labour relations, human rights, diversity and inclusion and product liability. Governance criteria refer to a company’s leadership and management philosophy, practices, policies, internal controls and shareholder rights.
Only considered by a few sustainably minded in the past, today ESG have evolved into something greater, pressed by weekly headlines telling the story of another shocking natural event somewhere in the world. Flooding in Europe. Heatwaves in Canada. Wildfires and record temperatures in a growing number of locations. Each time one of these happens, pressure builds for change – and the financial world is now in the eye of the storm. Climate risk has become an investment risk.
ESG principles are rapidly moving from simple compliance requirements to legal standards, and are now a vital tool for every business, investor, asset manager and insurer uses to drive performance.
And as the importance of ESG principles grows, so does the number of frameworks, industry bodies and indices underpinning them.
The ESG landscape has become an ecosystem, made up of a variety of different elements. Some have greater consequences if they are ignored, some have greater standing within the financial world.
Like in the real ecosystem, those who adapt fastest are likely to have a lasting competitive advantage.
However, unravelling the complexities of the ESG ecosystem is not always an easy task.
Our ESG guide aims to shine a light on this ecosystem – who is who, and exactly what companies should prioritise as they navigate the ESG reporting requirements.
The guide has four sections:
The ESG ecosystem has become a difficult space to navigate. Failure to identify which industry bodies, frameworks, standards or ratings are most relevant to your business could affect your ESG score or make your ESG reporting useless.
more than a word.