ESG (Environmental, Social, and Governance) criteria refer to a set of environmental, social and governance factors of a company or entity. They are used to assess how an organisation deals with the challenges and opportunities related to environmental, social and governance aspects of its business.

WHAT IS THE IMPORTANCE OF THESE CRITERIA?

Investors and shareholders are increasingly considering these ESG criteria when making investment decisions, as they recognise that sound management of environmental, social and governance issues can have a positive impact on a company’s long-term financial performance.

E for Environmental: refers to a company’s practices in relation to the environment. For example, natural waste management, greenhouse gas emissions or energy efficiency.

S for Social: refers to a company’s management of the people who are part of its teams, as well as its suppliers. For example, fair labour practices, occupational health and safety or human rights, diversity and inclusion.

G for Governance: refers to companies’ commitment to good governance, codes of ethics and conduct, transparency and anti-corruption of the board of directors and management team.

ESG criteria are important for several reasons:

  1. They help companies identify and manage risks related to the environment, society and governance.
  2. They promote long-term sustainability by integrating sustainable practices into a company’s strategy and operations.
  3. They provide financial returns as there is evidence that companies that perform well in terms of ESG criteria can achieve better long-term financial results.
  4. They reflect a company’s social responsibility towards the environment in which it operates and its stakeholders.

Ultimately, they are important because they help companies manage risks, promote sustainability, improve financial performance and demonstrate corporate responsibility.