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 ESG explained 

ESG is a framework,  used to assess material sustainability-related risks and opportunities, connected with environmental, social, and governance factors.

Investors consider ESG to evaluate company value, as efficient management of ESG -related risks and opportunities leads to higher long-term returns. ESG factors play a crucial role in ensuring accountability and developing effective systems for managing the impact of a company.

The ESG framework can be linked to a rapidly evolving regulatory environment and various regulations are being adopted all over the world, pressing companies to report on non-financial / ESG aspects. 

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ESG factors

The ESG framework adopts a holistic approach where sustainability extents beyond environmental aspect and considers social and governance factors as well

Environmental

  • Energy, water and raw materials consumption 

  • Hazardous substances use

  • Land and biodiversity 

  • Waste management and pollution 

  • Carbon footprint  

Social

  • Safety and health 

  • Diversity, inclusion and equal opportunity 

  • Ethical care and use of animals

  • Labor conditions

  • Rights protection 

  • Harassment prevention

  • Work environment 

Governance

  • Corporate policies and practices

  • Regulatory compliance

  • Relations with clients, suppliers and subcontractors

  • Anti-corruption and transparency 

  • Data protection and privacy policies 

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Why is ESG important for the business

Investors are increasingly incorporating ESG considerations into their decision making and there is a broad and rapid adoption of sustainable investing and ESG principles.  GenZs and Millennials are starting to own assets, gaining investment power and demand their investments be placed in sustainable businesses. Access to finance will increasingly depend on the company's ability to prove sustainability awareness. In addition, customers are demanding companies to  be more environmentally and socially conscious and transparent. 


ESG is key to understanding and mitigating business risks. ESG issues can have a material impact on a business’ value mainly through reputational and financial risk. Investors, which monitor ESG aspects across their portfolio will  benefit from early notifications on embedded risks and improved performance, and will be better prepared for evolving regulatory landscape. Businesses, looking to attract finance, proactively avoid risks and gain a competitive edge should embed ESG into their strategy. 

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