In the 1960's, the concept of sustainable investment to promote good socio-environmental practices under environmental, social and corporate governance criteria.
The term ESG refers to the factors that are taken into account when investing in a company and allows you to select which assets to make sustainable investments in, evaluating environmental, social and corporate governance variables, highlights Concur.
In other words, they have to consider not only the financial details, but also the aspects that may affect the valuation of the investment in the future, because the best interest is to combine economic profitability and long-term risks.
In 2005 the UN launched the Principles for Responsible Investmentbased on the ESG criteriaSince then, more and more investments have been made in line with these principles, with the aim of improving economic profitability in a sustainable manner.
Environmental criteria
It is based on the direct or indirect effect of the company's activity on the environment. It considers environmental impacts such as pollution, climate change, deforestation, greenhouse gas emissions, as well as activities or efforts to mitigate these adverse effects.
The evaluation of these factors has the following objectives:
- Resource management.
- Pollution prevention.
- Reduction of emission sources that cause climate change.
- To make environmental reports or disclosures.
- Avoid or minimize environmental impacts.
- Reduce costs.
- Use renewable or clean energy as a source for profitability.
- Avoid regulatory, litigation and reputational risks.
Social criteria
Refers to the effect or impact on the social environment of a company's activities in terms of diversity, stewardship, human rights, health care and philanthropic aspects.
Its main objectives are:
- Promote health and safety at all times.
- Encourage good relations between workers and the company's management.
- Protect universal human rights.
- Integrity-driven vision and mission.
- Increase productivity levels.
- To highlight the defense of ethical and moral values in the culture.
Corporate governance criteria
It involves remuneration, tax strategies, shareholder rights, board structure, interaction between shareholders and management, transparency, fairness, code of ethics and economic profitability.
Objectives:
- Increase the diversity and accountability of the corporate board.
To ensure the legal protection and rights of shareholders. - Prepare reports and disseminate information in a timely manner.
- Integrate and guide shareholders and management in common interests.
- Strict monitoring of financial statements.
- The correct application of these guidelines has become a quality indicator for companies that want to be successful, sustainable over time and that want to assume roles of commitment and social responsibility.
Advantages of adopting ESG criteria
Companies that join this trend and adopt these criteria in their operations increase liquidity in business shares, due to the interest that investors and lending institutions have developed in companies that run ESG-based portfolios and programs.
In addition, they generate high competitive value, produce a positive image among environmental activists and social organizations, avoiding conflicts or negative campaigns against the company.
A large number of investors and banks maintain special credit lines for companies that carry out projects with ESG policies, in addition to the acceptance and positive recognition by the general public.
Source: Concur
