Beyond Profit: The ESG Concept of Investing

In recent years, a significant transformation has been made in the sector of Financing and Investing. Many changes and Revolutions have been made to enhance the financial and overall system in the world.

As Investors and businesspersons realize the adverse impact of their actions on society, a new term is emerging in the world of finance and investing that deals with the importance of Environmental, Social, and Governance (ESG) principles. In this article, we will be discussing the ESG trend in recent days and its different aspects.  

Understanding the ESG concept 

ESG is more than ticking boxes, it’s about making a difference for your business and our world.

In simple words, Environmental, Social, and Governance (ESG) is a practice of adopting sustainability, responsibility, and growth rather than only focusing on the profit of the company. 

In today’s world, ESG has been playing a significant role in reshaping the financial landscape and paving the way for a future where economic prosperity is in harmony with social well-being and environmental promotion. ESG deals with three primary aspects which include Environment, Social, and Governance. 

ESG focuses equally on these three factors and combines them to achieve the financial and sustainable growth of a company. Let’s take a dive into the three aspects of the ESG concept and understand them in brief.

-The Environmental Pillar- The Environmental aspect of ESG is all about Mother Earth. Any Investors aware of the ESG concept look at the Environmental factor before deciding on whether to invest in the company or not. It includes questions such as, “Are they using energy wisely? Are they reducing pollution? What contributions have the company made to Environmental wellness?”, and so on... 

The companies adopting the ESG concept focus on reducing carbon footprints, using alternative sources of energy, and adding efforts to combat climate change. 

-The Social aspect – It focuses on the well-being of the people rather than focusing on the profit of the company. Any investors willing to Invest in a company with an ESG concept have questions such as “How are the workers treated? How is the diversity inside the company? and so on.” It also focuses on other things such as Gender Equality, Employee well-being, Community development, etc. 

-Governance for a Resilient Company- Good governance is essential for the overall growth of the company. Any investors approaching to invest in a company with or without the ESG concept first look at the governance of the company. Good governance means the growth of the company and the ability to perform well in the long term. ESG concept Investors take questions such as “What are the Anti-corruption efforts? What are the risk management practices? and so on. It also includes other factors such as Ethical leadership, Transparent practices, etc. 

Has ESG been implemented in the World??

ESG data is more important now than ever - IBM

If we talk about the current scenario with ESG investing then it has gained huge traction and many investors are now aware of the ESG concept when investing in any company. The biggest and top companies in the world have begun to follow the policy of ESG and it has made a huge difference. Some of the companies following ESG policy are:

 -Nestle: The company has focused on sustainable sourcing of raw materials, responsible water usage, and efforts to address child labor in its supply chain.

-Blackrock: One of the world’s largest investment firms, Blackrock emphasizes ESG integration across its portfolios and engages with companies to improve their ESG performance.

- PepsiCo Inc: The company has contributed to Global warming combat by targeting net-zero greenhouse gas emissions across its supply chain by 2040. Also, the company said in its ESG report that it is working to promote regenerative agricultural practices, which make soil healthier and reduce carbon from the environment.

-Cisco Systems Inc: The company also announced the target to reach net-zero emissions across all scopes by 2040. The company also made $477 million worth of contributions to community programs and met its goal to source 85% of electricity needs through renewable energy sources.

-Apple Inc: The company has an ambitious goal to become carbon neutral by 2030 and the company is making significant progress towards this goal. The company aims to reduce plastic usage and claims that 20% of the materials used in its products are made from recycled materials.

Besides these, there are also other several giant companies marking their way ahead in the ESG and promoting a Greener and cleaner Earth as well as promoting peace. 

Some other giant companies include companies such as PayPal, Verizon, Danone, Accenture, NVIDIA, etc.

Closing thoughts

ESG has been a burning topic in the world for the past few years. The concept of ESG investing aware the world about the increasing Global warming as well as the social and governance factors that lead to the overall profitability of the company. In a world where financial success only matters, ESG is a potential concept to ignite the awareness of the public about the transformation. The journey towards a brighter and cleaner world begins with the choices we make today, and ESG investing paves the way forward, reminding us that every decision counts in the grand coming of our shared future. 

Written by Denish Khatri

Khatri is a student at the Trinity International College located in Kathmandu. For further information, you can contact Denish Khatri at khatridenish66@gmail.com