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What is ESG and why is everyone talking about it?

ESG stands for Environmental, Social, Governance (ESG) and is basically a score that is given out by different rating institutions. These include Thomson Reuters, Bloomberg, Sustainalytics and many more. These institutions use different quantitative and qualitative methods to assign a score to a company. The score tends to go from 0 to 100 - the larger the score the higher the ESG performance of a company.

(Taken from Adobe Stock)

There is an increased demand from investors, employees as well as customers for companies to engage in ESG activity and increase their ESG impact. Now most banks offer ESG investment options and companies increasingly advertise their ESG impact. According a recent Forbes article (2019) "almost 25% of investment in the United States now goes into ESG companies" and interest is still growing.

Will ESG replace Corporate Social Responsibility (CSR)?

According to the same article, ESG is likely to replace CSR as it is a "fully integrated strategic objective" closely related to the company's mission and is easy to integrate into daily operations.


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