ESG: the Three Pillars of the Future
ESG stands for Environment, Social and Governance factors.
These three factors could well be the foundation of the investing, development and policy world. In 2015, the UN formulated 17 interlinked Sustainable Development Global Goals to achieve by the year 2030. At international conferences, such as the Paris Agreement, global leaders signed and pledged to achieve all 17 SDGs.
The goals all range from eliminating poverty and hunger, providing good health services, clean water, gender equality all the way to protecting life on land and water. They also emphasise infrastructural innovation and promote inclusive justice systems world over. Addressing climate change with impactful policies is stressed upon. Ensuring production and consumption patterns are sustainable is also another important global goal. Making communities and cities resilient is another crucial goal.
These goals are admirable and all 17 goals fit nicely into the ESG framework. Investment is a crucial aspect to sustainable development and a suitable framework is needed to measure whether investments and policies are leading to the development the world is striving for. When deciding how to invest, the ESG factors can provide a good framework to smartly divide resources and helps maintain socially responsible strategy for building a more sustainable future.
The first factor, Environment, has key topics under it such as Climate Change, Natural Resources, Pollution Waste, Environmental Opportunities. These topics help to stay mindful of of issues such as Carbon Emissions Carbon Footprint, Water Use, Biodiversity Degradation, Toxic Waste and even Renewable Energy.
The second factor, Social, includes topics such as the Health and Safety of Workers, Labour Management, Privacy and Data Security, Controversial Sourcing, Access to Finance and proper Nutrition.
Last but not least, the third factor, Governance, strives to focus on issues such as Business Ethics, Anti-Competitive practices and even Tax Transparency.
It is clear that ESG Investing can be a clever and dependable tool in fulfilling ethical and driven sustainable development. However, it is clear that the factors that fall under the three umbrella terms of the abbreviation are constantly evolving and are interconnected, meaning change in one can lead to a change in another. For example, pollution waste and water use have clear connections. Similarly, business ethics and the health and safety of workers show some degree of interconnectedness. Taking this into account, the sustainable investing landscape is constantly evolving. ESG frameworks must be regularly updated, time frames must be renovated and key topics must be revised.
