ESG ENVIRONMENTAL SOCIAL GOVERNANCE  

ESG stands for Environmental, Social, and Governance. These criteria are used to evaluate a company's operations and performance in terms of sustainability and ethical impact. ESG has become a key consideration for socially responsible investment (SRI) and is increasingly integrated into investment decisions. 

• Environmental: This aspect examines the impact of a company’s activities on the environment. Key factors include carbon emissions, waste management, resource use, energy efficiency, and biodiversity conservation. 
• Social: This dimension looks at how a company manages relationships with employees, suppliers, customers, and the communities where it operates. Important factors include labor practices, human rights, community engagement, and customer satisfaction. 
• Governance: This criterion assesses the company's leadership, executive pay, audits, internal controls, and shareholder rights. It includes evaluating the diversity and structure of the board, transparency in reporting, and adherence to corporate governance principles. 

The increasing focus on ESG criteria reflects evolving social values and the recognition of the importance of sustainability. Investors are paying more attention to environmental and social issues, such as climate change, wage equality, diversity, data protection, and financial inclusion. ESG criteria help investors assess risks and opportunities that traditional financial analysis might overlook. 

Rating agencies and investors emphasize the need for consistent and comparable sustainability data to evaluate companies effectively. This helps in making informed investment decisions and ensuring that investments contribute to long-term sustainability goals.  

The importance of ESG criteria has grown globally, particularly highlighted during the Covid-19 pandemic and subsequent economic and social crises. The ESG Investment Observatory in March 2021 indicated that major asset managers worldwide are integrating ESG factors into their investment policies. 

The World Economic Forum's Davos Agenda has underscored the impacts of climate change on the economy and society, promoting sustainability and inclusive economic practices. The 2020 manifesto for sustainability and an inclusive economy calls for companies to collaborate with stakeholders to create shared and sustained value. 

In the European Union, significant legislative progress has been made, including the creation of a taxonomy for environmental economic activities based on objectives like climate change mitigation, water resource protection, transition to a circular economy, pollution prevention, and biodiversity protection. The European Green Pact ensures that all policies and legislative proposals incorporate sustainability aspects.