Corporations are greedy and callous. They harm the environment for profits. They are the villains to fight against.
This is what I learned from climate change documentaries.
How can individuals fight against corporations? Corporations are much more centralized and well-managed. They are too big to ignore.
A new strategy offers people a way to pressure corporations for change. That is what ESG promises.
ESG stands for environmental, social, and corporate governance.
ESG covers a wide spectrum of issues that are not a part of financial analysis traditionally but have financial relevance. It is a term used by investors to assess corporate activities related to the three areas listed above. ESG factors include how corporations respond to climate impact, how good they are with waste management, how they treat their workers, how effective their health policies are when facing accidents, and whether they have a corporate culture that builds trust and fosters innovation.
ESG factors are also considered non-financial indicators and are used to identify issues related to business ethics, corporate social responsibility, and corporate governance.
The concept of ESG emerged in 2004 when former UN Secretary General Kofi Annan invited over 50 major financial institution CEOs to join an initiative aimed at integrating ESG principles into corporations.
In 2013, ESG investing accelerated quickly when published studies showed that good corporate sustainability performance is associated with good financial results.
Today, ESG mandated funds account for 40% of all assets under management, roughly $46 trillion. The rise of ESG investing is proof of how markets are changing. Investors are voting with their money to change the market to be more value-centered. The era of free pollution is on the trajectory to end.
It is time to assess the impact of ESG investing. How effective is ESG? Has ESG investing prompted corporations to change? If so, in what ways? What impact has ESG made for corporate responsibility? What has been the progress of implementation of ESG? What are the obstacles or criticisms related to ESG?
For my beat, I’m going to explore these questions, examining the credibility, controversy, and potential around ESG investing.