ESG

ESG (Environmental, Social, and Governance) refers to a set of factors that investors use to evaluate the sustainability and ethical impact of a company’s operations. These are used to assess the broader impact of a company on society and the environment beyond traditional financial metrics.

The “E” in ESG refers to environmental factors, such as a company’s carbon footprint, resource usage, and pollution. The “S”, in turn, stands for social factors, which include employee wellbeing, community impact, and human rights. Finally, “G” refers to governance, such as board diversity, executive compensation, and shareholder rights.

Investors increasingly take ESG factors into account when making investment decisions. This is partly due to a growing awareness of the impact that companies can have on the environment and society, and the potential financial risks associated with these impacts; investors are increasingly interested in aligning their investments with these values by supporting companies that are making a positive impact on the world. Most private equity firms require an ESG strategy to be put in place before or shortly after their investment.