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ESG and sustainable business

ESG and sustainable business

ESG - Environmental, Social and Governance criteria are a set of non-financial performance indicators that score how well a company is performing in these areas: 

    Environment – Energy efficiency, emissions, climate change strategy, water efficiency, waste management and more
    Social – Health and safety, working conditions, human rights, child labour, slavery, and more
    Governance – Board diversity and structure, executive compensation, political lobbying and more

The start of ESG

“The story of ESG investing began in January 2004 when former UN Secretary General Kofi Annan wrote to over 50 CEOs of major financial institutions, inviting them to participate in a joint initiative under the auspices of the UN Global Compact and with the support of the International Finance Corporation (IFC) and the Swiss Government. The goal of the initiative was to find ways to integrate ESG into capital markets. A year later this initiative produced a report entitled “Who Cares Wins,” with Ivo Knoepfel as the author. The report made the case that embedding environmental, social and governance factors in capital markets makes good business sense and leads to more sustainable markets and better outcomes for societies. At the same time UNEP/Fi produced the so-called “Freshfield Report” which showed that ESG issues are relevant for financial valuation.”

Source: The Remarkable Rise of ESG by Georg Kell, Jul 11, 2018, Forbes

 

For further background to understanding ESG measures:
Eccles, Robert G. and Stroehle, Judith, Exploring Social Origins in the Construction of ESG Measures (July 12, 2018).
Available at SSRN