What is Environmental, Social, and Governance?

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Environmental, Social, and Governance Definition

Environmental, social, and governance (ESG) is a framework used to assess an organization’s business practices and performance related to sustainability and ethical issues. The environmental component of ESG refers to the company’s environmental impact, including its energy consumption, carbon footprint, waste management, and pollution. The social component of ESG refers to the company’s impact on people and society, including its relationships with employees, customers, and suppliers. Governance refers to the management structure and practices of a company, including its leadership, ethics, and transparency.

Investors are increasingly employing ESG criteria to evaluate businesses and gauge their potential long-term performance. By taking environmental, social, and governance factors into account, investors can make more informed decisions and support businesses that are committed to sustainable practices and positive social impact. ESG investing is frequently viewed as a means of aligning investment decisions with social and environmental objectives while promoting long-term financial returns.