Environmental, Social and Governance (ESG) criteria are an increasingly popular way for socially aware investors to assess companies to be included in their financial portfolios and identify potential sustainable and responsible investments.
According to the Global Sustainable Investment Review, sustainable investment activities continue to grow globally: Europe has the highest level of sustainable assets (over $14 trillion and growth of +11% from 2016 to 2018), although other areas of the world are experiencing a strong acceleration (with Japan reaching +308% in the same two-year period).
How a company manages environmental (E), social (S) and governance (G) aspects is a distinctive sign of the company’s long-term quality, how it is managed, its ability to create value and its long-term financial sustainability.
Companies with high ESG values are better equipped to deal with crises and perform better than their competitors on average.
The world’s leading proponent of responsible investment is the UN PRI, (United Nations Principles for Responsible Investments), an initiative officially supported by the United Nations, in partnership with Global compact and UNEP Fi, which aims to achieve a sustainable global financial system. Through the adoption of the 6 Principles for Responsible Investments, investors are committed to incorporating ESGs in their investment decisions.
They include issues related to CO2 emissions and climate risks, resource consumption (water, energy, etc.), pollution, waste and opportunities related to the environment.
Factors affecting this assessment include the working condition of employees, attention to workplace safety and health, diversity protection and proper interpersonal relationships between employees, possible conflicts with the local community and different categories of stakeholders.
It includes elements related to corporate governance and aspects such as the quality and effectiveness of the board, such as the presence of women or the remuneration of managers compared to employee salaries; the adoption of anti-corruption policies.