We took a look at ESG in our latest article all the way back in August and to start the new year, it’s worth diving a bit deeper into the topic. Mostly, because environmentally-conscious investors and activist hedge funds now pay serious attention to ESG metrics of companies before making investment decisions. According to data from Bloomberg Intelligence, global ESG assets are expected to surpass a whopping $50 trillion by 2025.
We should all know by now that ESG stands for Environmental, Social and Governance. In simple terms, it refers to the three key areas that companies and organisations should be aware of and take into consideration in order to be considered “sustainable.”
- Environmental refers to a company’s impact on the environment. It includes things like pollution, carbon emissions, and energy efficiency.
- Social refers to how a company treats its employees, customers, and the communities it operates in. It includes things like labor practices, human rights, and community engagement.
- How a company is run, including things such as transparency, executive pay, and the overall effectiveness of a company’s leadership – that’s Governance.
Overall, ESG is a way to evaluate a company’s overall sustainability and impact on society, the planet and its stakeholders. Recently, regulatory pressure from governments around the world is causing more companies to take this criteria seriously. The Securities and Exchange Commission is actually working to develop a common benchmark on how sustainable products are assessed and reported. Such pressure, however, is resulting in a backlash from several circles. Many fund managers believe these ESG regulations tend to be too harsh, and can affect their ability to perform to ensure maximum returns for their clients. Profits over environmental and social responsibility anyone? Never heard this one before.
So what global companies made the Top 10 ESG list in 2022?
- Alphabet (also known as Google)
- Bank of America
Unsurprisingly dominated by tech, the list was concluded by Yahoo Finance using the latest dataset of Just Capital, a not-for-profit founded in 2013 by popular individuals like billionaire Paul Tudor Jones, Deepak Chopra, Rinaldo Brutoco, Arianna Huffington, Paul Scialla, Alan Fleischmann, among others, is striving to solve major problems related to environment, gender, racial justice and equality. The above ranking focused mainly on the environmental aspect of the ESG criteria and talked about the projects and investments these mentioned companies have committed to in order to tackle climate crisis.
It’s great to see tech giants aiming to be true to ESG and we can only hope that the rest of the industries will follow. Starting, in an ideal world, with energy production, agriculture, transportation, manufacturing, and last but not least, building and construction. Being true to ESG principles requires a commitment to integrating environmental, social, and governance considerations into a company’s operations and decision-making processes. Whether it’s by implementing sustainable practices such as reducing energy consumption and waste, investing in renewable energy, and setting targets to reduce greenhouse gas emissions or ensuring fair labor practices, promoting diversity and inclusion, and engaging with the communities in which a company operates.
It is crucial to regularly assess and report on progress towards ESG goals and targets, and to engage with stakeholders on its issues. ESG is definitely not a one-time process or report but rather a long-term commitment, and being transparent about the efforts and progress of it is key to maintaining the trust of everybody involved.
Leave a Reply