Explained: ESG framework and factors to consider!

Businesses with good ESG practices have a better reputation and face less risk since they prioritise sustainability as a core value!

Every investor generally considers the stock's value, the ability of the company for generating profits and fulfilling its obligations, as well as the returns the stock offers. ESG is a technique to safeguard investors from risks resulting from potential environmental and social problems associated with the company, which attracts socially conscious investors. Let's explore the concept of ESG and the factors to consider when making investing decisions!  

The abbreviation ESG stands for Environmental, Social and Governance. It is simply a framework that assists stakeholders in understanding how a business manages environmental, social and governance related risks and opportunities.   

It is responsible for thoroughly assessing how long an organization's operations can be sustained. The primary goal of this framework is to ensure that sustainability is not restricted to environmental challenges but is integrated into all aspects of human life.  

Environment: This pillar focuses on climate change, carbon emissions, natural resource availability and utilization, biodiversity, pollution and strategies to minimize it and potential in green building, among other things.  

Social: In addition to recognizing humans as an asset, this pillar is concerned with labour management, employee health & safety, product quality & safety, data security, privacy and future social opportunities.  

Governance: It primarily evaluates corporate governance and practices. Some of the key factors to evaluate are board diversity, remuneration, accounting and policies, business ethics & values, work culture and tax transparency.  

Businesses with good ESG practices have a better reputation and face less risk since they prioritise sustainability as a core value!