ESG(Environmental, Social, and Governance) is an evaluation framework used to measure the performance of a company or investment in terms of environmental, social and governance criteria. This concept, which has become essential in the world of finance and investment, is used by investors to assess a company’s sustainability and long-term impact beyond its financial performance alone.
Environmental criteria (E)
Environmental criteria concern the way in which a company manages its impact on the planet. This includes elements such as :
- Managing carbon emissions and pollutants;
- Consumption of energy and natural resources;
- Waste management and pollution prevention ;
- Commitment to sustainable practices, such as energy efficiency or the use of renewable energies;
- Managing the risks associated with climate change.
These criteria enable investors to understand the extent to which a company does or does not contribute to environmental protection, and how it manages environmental risks that could affect its long-term profitability.
Social criteria (S)
Social criteria assess how a company manages its relationships with its employees, suppliers, customers and the communities in which it operates. This includes aspects such as :
- Working conditions and respect for employees’ rights;
- Diversity and inclusion within the company ;
- Customer relations and satisfaction;
- Ethical practices in the supply chain ;
- The social impact of our products and services.
A good score in the social criteria reflects a company concerned about the well-being of its stakeholders, capable of managing reputational risks, and maintaining a productive and harmonious working environment.
Governance criteria (G)
Governance criteria focus on the way a company is run. They analyze elements such as :
- Board composition (diversity, independence) ;
- Executive compensation structure ;
- Transparency and ethical business practices;
- Risk management and compliance with laws and regulations;
- Shareholder relations.
Good governance means that the company is well managed, transparent and accountable, reducing the risk of corruption, conflicts of interest and inefficiency.
The importance of ESG for investors
The integration of ESG criteria into investment decisions has become increasingly popular, particularly with the rise in demand for socially responsible and sustainable investments. Investors are no longer just looking to maximize financial returns, but also to invest in companies that act ethically, respect the environment and are transparent in their management. ESG-labelled investment funds are growing rapidly, and regulators, particularly in Europe, are pushing for greater transparency on these criteria.
Indeed, studies have shown that companies that perform well on ESG criteria are often better prepared to face risks such as environmental crises, social conflicts or governance scandals. They also tend to have more solid long-term growth prospects, as they adapt to the new expectations of consumers and regulators.
