ESGs are a criteria used by impact investors to analyse a company. It’s a bit like looking at the nutrition values on the back of a cereal box. Some cereals will have higher protein, sodium or carbohydrates. They’re all worthy breakfast foods, but each person (investor) will be searching for something different in their cereal (company).
If we break down the ESG criteria, you’ll find ‘E’ stands for environment, ‘S’ stands for social, and ‘G’ stands for governance. Environmental criteria refer to a company’s green thumb. Are they using renewable energy? What’s their Green Star rating? Social criteria examine how companies manage relationships with their community, customers, employees and suppliers it a safe and diverse workplace? Lastly, governance deal with a company’s leadership, executive pay, audits, internal controls and shareholder rights. Is the company transparent and accountable? But enough examples – ESGs are used by investors to analyse the values of a company.
Tips and tricks
Using ESGs can help us decrease stress, regulate emotion and create clear investment goals. After all, ESGs are the backbone of socially-responsible and mindful investment decisions.