ESG also known as Environmental, Social and Governance, is a framework used for risk-management and long-term value benefits. Environmental, Social and Governance (ESG) investing is a strategy one can use to do community service. ESG investing is based on third-party ratings that helps evaluate a company's environmental performance, social impact, and governance policies. It is widely adopted nowadays all over the world as stakeholders demand this criterion for decision making and investing. The companies that participate in ESG generally hold wide diversification advantages, particularly from external organizations, independent research agencies and studies. ESG is the new trend which can be seen over all the platforms. ESG is the new trend which can be seen over all the platforms. ESG ensures that the company which investors want to spend considers these factors in its operation, production, management and delivery. Environment It takes into account the kind of effect the company's work has on the environment. This encompasses the carbon footprint and toxic chemical handling practices. Further, it involves the manufacturing and sourcing of the company's supply chain, and the number of natural resources it consumes during each stage of production. Environmental criteria may include a company's use of renewable resources, water and air pollution management and deforestation practices. Social It broadly focuses on both community and organisational impacts, so it refers to how the company positively impacts society and the community at large. Every social issue ranging from LGBT rights to inclusion of all-racial efforts, gender diversity in the workforce, to promotion practices, all impact a business's ability to grow. Not only what it does, but also how it interacts with other businesses, the community and society to get into territory of doing good. There are a number of significant factors that are susceptible to manipulation in the social realm. There are many different ESG factors but all are about social relationships. For socially conscious investors, the company"s relationship with its employees is crucial. Governance What are the boards and management doing to foster sustainable and successful change? Who governs the company? This ranges from executive pay to the well-being of the stakeholders to the overall performance of the leadership to shareholders to various concerns of diversifying the leadership. Accounting, financial, transparency and full disclosure are key in corporate governance. The board members must act in a moderate capacity and remain impartial, even when dealing with shareholders' interests. There are multiple ways to start investing money in sustainable growth: robo- advisors and those that allow you to invest yourself, as well as advisors who will assist anyone in the process. Comparing various investments is made easier by the results produced by ESG research firms, which provide a score with varying degrees of relative simplicity and precision. ESG goals are frequently reported. Sustainability reporting may lead to improved corporate reputation, increased innovation and even better risk management. There are several ways to build integrated reporting into social responsibility strategies, such as using established frameworks viz. GRI and CDP or ranking programmes like the Dow Jones Sustainability Index (DJSI). This step is very crucial for the development of the country with consideration of environmental impacts. Also, customers all over the world prefer to engage with those who care for the people, environment and its employees. Preferences are changing and so does the world.
References: https://www.forbes.com/advisor/investing/esg-investing/ https://www.cfainstitute.org/-/media/documents/article/position-paper/esg-issues-in-investing-a-guide-for-investment-professionals.ashx
Article submitted by Riya Bhandari & Amlan Shome Lead Coordinator & Volunteer, OESI
One Earth Social Initiative (OESI) 