What is ‘ESG’?
ESG is a collective term that stands for environmental, social and governance. ESG are the variables in standards used to measure a business's impact on society, the environment, and how transparent and accountable its governance is.
The environmental standards measure how a company safeguards the environment through things like its corporate policies addressing climate change. The social criteria consider how the business manages its relationships with employees, suppliers, customers and the local community. Governance looks at a company’s leadership, executive pay, shareholder rights, internal controls, and audits.
ESG investing is used by socially conscious investors to screen investments based on corporate policies and to encourage companies to act responsibly. It can also help portfolios avoid holding companies engaged in risky or unethical practices and ensure businesses are held accountable.