What is ESG?
Operations of all businesses have Environmental, Social, and Governance (ESG) concerns. In the last few years the term EGS has been frequently used in the sustainability sphere. This term initially arose from the ESG assessment conducted by financial institutions for making investments. Boadly these ESG issues include the following:
The E in ESG stands for environmental criteria. These include energy consumed, GHG emissions, waste generation, water and other natural resource consumption as well as release of pollutants.
S denotes the Social Criteria and includes issues such as community welfare programs, labor relations, diversity and inclusion, human rights, consumer protection etc
G, represents the Governance of the organisation and includes practices, controls, and procedures a company adopts in order to govern itself, make effective decisions, comply with the regulations, operate fairly and meet the needs of its stakeholders.
Sustainable Finance & ESG
Sustainable finance is the process of considering the environment, social and governance (ESG) in the financial decision-making process. In short sustainable finance is supporting economic growth by keeping the environmental, social and governance issues in mind and mitigating these as far as possible.
Sustainable finance can be of two different types: purely for financial profit, termed as traditional investment, and purely for ESG impacts termed philanthropic donations.
The history and evolution of sustainable finance start as early as the 1990s when Corporate Social Responsibility (CSR) strategies were first implemented to align the social causes. In the 2000s sustainable finance market started development with Principles of Responsible Investment (PRI) in 2006, First Climate Awareness Bond in 2007, First Green Bond in 2008, and Green Bond Principles in 2014. Later in 2015, major international initiatives were launched, namely Task Force on Climate-Related Financial Disclosure (TCFD), Chinese Green Bond project catalogue, The Addis Ababa Action Agenda, UN Sustainable Development Goals (SDGs), The Paris Climate Agreement. Lastly, in 2018 reforms were introduced to the EU Action Plan on sustainable finance.
There are several types of sustainable investing like Socially Responsible Investing (SRI), Impact Investing, Green Bonds and ESG. This article will focus shortly on how ESG is a more meaningful measurement of risks and rewards management for sustainable finance.
Our ESG Services
Setting up ESG Framework
ESG Assessment & Due Diligence