What is the ESG approach, in what form and how is it present in corporate governance, and how can a business become an ESG company? In this article we will answer these questions.
We’ll also make some cautious predictions about what the future holds for the spread and popularity of ESG at global and domestic level.
The role and essence of ESG funds
The meaning and essence of the ESG approach and how to put it into practice, whether ESG funds have assets similar to traditional investment funds. So, the fund manager buys shares, bonds, and other assets and then returns a substantial part of these to investors.
ESG is an acronym for Environment, Social, and Governance. In English, it refers to the combination of environmental, social, and governance functions.
ESG funds, therefore, need to perform well in all three areas to be valued by the market at the expected level. Because their reliability stands or falls on the combined set of environmental, social, and governance functions.
How can a company become ESG?
For this to be successful, it’s of course essential that the company in question performs flawlessly in each of the above criteria. For example, the environmental factor can be helped by waste management, air pollution levels, and the promotion of a circular economy.
For the social factor, the treatment of employees and customers, respect for human rights, and the protection of personal data can be high priorities. And on the governance front, transparency, financial transparency, and business ethics could be more important.
So to be ESG certified, a company must be at the forefront of all of these. It is predicted that it will be even more so in the future.
ESG trends and vision for the future
Recent social, health and economic events have shown that ESG investments are not only transparent and positive but also crisis-proof.
Accordingly, a strong uptake can be expected in this area. More and more companies are likely to see ESG as an example to follow, which could have a positive impact on the functioning of many industries as a kind of self-spreading process.
Indeed, by making environmental, social, and corporate governance mechanisms sustainable and transparent, stable, efficient, and prosperous companies can be created. This positive vision is to be welcomed.