ESG is gaining mass importance globally and this importance remains justified as well. Mentioning the justification of it. It talks about sustainability, inclusivity and the most important of all, transparency.
Although hitting the profit margins has remained to be the center of attention for businesses, what drives that? It’s always a strategy that gets successful and here, that strategy is using ESG policies.
What Is ESG Investment?
ESG stands for Environment, Social and Governance. This abbreviation is new to a few ears but this has remained important for decades. Although the recent global pandemic only worked as a catalyst for this, investors are now digging into the benefits it offers. Which presumably are a list of benefits that are proven to help businesses in the long run.
Getting to what ESG investment means. It’s an investment in a company for being more environmentally friendly, socially responsible and keeping transparency for the financial procedures.
For explaining ESG investment. It’s an investment towards a sustainable attempt of running a business which is socially more responsible. ESG investment comes with a set of principles. The list of these principles is long but to use a few as an example, it talks about the protection of minorities, environmentally friendly methods of waste management and transparency of all the legal procedures to the board of directors and investors.
Why ESG Investment Matters?
For why ESG matters has remained to be a topic of long discussions. The world has remained irresponsible from its social duties for decades now. This has only led to global catastrophes that were damaging to a united group of business corporations in the world.
Investors are now looking for methods their investment can be less risky and help them in the long run.
ESG initially was mistaken for a policy structure that would result in a mass gain of profits. Instead, study and researchers successfully proved how wrong that concept was.
For example, if investors invest in a company that has the lowest standards of practice of ESG. It is likely that the workers won’t be getting their deserved wage. Protests will be on peak and this directly has an affect on the productivity and lead generation of profits of the company.
A group of researchers who researched ESG policies and how it could be a potential win for the investors. It was proven companies had a higher rate of delivering a high standard performance and the profits were at an all time high!
Wrapping It Up
Hence, ESG indeed was a topic of debate in the 90’s but in the 21st century, it’s more demanded than ever. Where a world speaks of inclusivity, provision of labour rights and companies adapting to sustainable waste management methods. Investors now need to make investments where there are more chances of winning in the long run where they get high returns. Especially, when compared to companies with low practice of ESG policies.