What Is ESG and Why Does It Matter?
How a new approach to doing business can hold companies accountable for their actions and add value to society
ESG keeps growing as a trend, as the public increasingly demands that businesses be held accountable for their actions. For the most part, people no longer want to consume products and services that inevitably harm the environment and society at large. They want ethical business practices with quality offerings.
Our planet is in crisis and people have been hit with the realization that their individual actions won’t cut it anymore. Corporations have a much larger impact, and, because they make pretty much everything we buy, consume, and discard, they are now being tasked with becoming a force for good.
No wonder, then, that ESG keeps growing, especially in the corporate sphere. But what exactly is ESG and why does it matter?
What is ESG?
Simply put, ESG stands for environmental, social, and (corporate) governance. It represents an approach to doing business that creates value for stakeholders, meaning employees, customers, suppliers, investors, and society at large.
Conscious consumers are demanding that companies prioritize ethics and sustainability in their practices, so a growing number of companies are adopting ESG principles to guide their decision-making.
The acronym was first coined by the United Nations in 2005, in a joint initiative with financial institutions. What started out as a UN-inspired niche in responsible investment grew into a global phenomenon.
The adoption of ESG standards keeps growing, taking on an increasingly larger proportion of the investment market. ESG global assets under management are predicted to hit $53 trillion by 2025, encouraging companies and capital markets to become more sustainable and ethical.
What are some ESG concerns?
In the US financial industry, market participants now prioritize how a company’s ESG risks and…