What is ESG?

ESG is a framework for assessing the sustainability and ethical impact of an organization and stands for three key sustainability dimensions:

• Environmental: This aspect refers to a company's ecological responsibility. This includes the use of natural resources, reducing emissions and waste, as well as developing and implementing sustainability strategies.
• Social: The social aspect looks at how a company shapes its relationships with employees, suppliers, customers, and the communities in which it operates. The focus here is on topics such as occupational safety, human rights, and social commitment.
• Governance: Governance refers to corporate management and control. This includes anti-corruption, the structure of the Board of Directors, and transparency in reporting.

Why is ESG important?

ESG criteria help investors to evaluate companies not only on financial aspects but also on their ability to operate sustainably and responsibly. This is crucial as sustainable practices are often an indicator of a company's long-term profitability and risk mitigation. Companies that meet high ESG standards can potentially respond better to regulatory changes, attract talent, and strengthen their market position.

Benefits of ESG:

• Risk management: ESG helps companies identify and manage risks resulting from their business activities and their impact on the environment and society.
• Investor relations: Many investors use ESG criteria to evaluate their investments to ensure that their capital is used sustainably.
• Compliance: Adhering to ESG standards can help companies meet legal requirements and avoid penalties or reputational damage.
• Brand image and customer loyalty: Companies with high ESG standards can often build a stronger bond with conscious consumers and improve their brand image.

How is ESG measured?

ESG is measured by specialized rating agencies that collect and evaluate data on a company's sustainability practices. These ratings can be used by investors to make decisions about buying or selling shares or other financial products.

ESG is a comprehensive approach that enables companies to assess and manage their long-term impact on the world. By implementing and improving ESG standards, companies can not only secure their own future viability but also make a positive contribution to global sustainability.