ESG

ESG stands for Environmental, Social, and Governance, and it is a framework used to evaluate a company's sustainability and ethical impact. The ESG framework considers how a company manages risks and opportunities related to environmental, social, and governance issues, providing insights into its long-term viability, corporate responsibility, and reputation.

The three core components of ESG are:

• Environmental: Assessing how a company's operations impact the environment, including energy usage, carbon emissions, waste management, and resource conservation.
• Social: Evaluating a company's relationships with employees, customers, suppliers, and communities, focusing on issues such as labor practices, diversity, and community engagement.
• Governance: Analyzing a company's leadership structure, executive compensation, transparency, and adherence to ethical business practices.

ESG has become a critical factor for investors and stakeholders, influencing decisions in sustainable finance, risk management, and corporate strategy. Companies with strong ESG practices are often seen as better positioned for long-term success and resilience in an evolving regulatory landscape.

Source(s):

• Corporate Finance Institute (CFI). (n.d.). ESG (Environmental, Social, & Governance).
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