Environmental, Social, and Governance (ESG) describes a sustainable, responsible, and ethical investment as the three central factors in measuring the sustainability and societal impact of an investment in a company or business. An ESG is the criteria that altogether establishes the framework for assessing the impact of the sustainability and ethical practices of a company on its financial performance and operations including social issues like a company’s labour practices; talent management; product safety and data security; governance matters like board diversity; executive pay and business ethics. (Refer to the CSR (Corporate Social Responsibility))
Reference Definition by Investopedia: Environmental, social and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments. Environmental criteria consider how a company performs as a steward of nature. Social criteria examine how it manages relationships with employees, suppliers, customers, and the communities where it operates. Governance deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights.
Related Definitions in the Project: The Project Management; Business Organisation
Example Article of the Environmental, Social, and Governance (ESG):
Corporate America Retreats from ESG Rhetoric (Source: Oil Price on 8 February 2024): By ZeroHedge - Investors are pulling funds from sustainable investments as the ESG (Environmental, Social, and Governance) bubble deflates, triggered by high interest rates, poor returns, plummeting stocks in renewable energy, stricter SEC regulations, political backlash, and Elon Musk's war on woke capitalism. At the same time, ESG mentions on earnings calls by corporate America have plunged. In 2021, during the pandemic boom, US ESG funds hit a record $358 billion in assets, up from $95 billion in 2017. But since then, investor interest has waned as higher borrowing costs impact capital-intensive clean tech stocks. Last week, Visual Capitalist's Dorothy Neufeld published a stunning graphic, citing Morningstar data. It shows investors dumped $5 billion from ESG exchange-traded funds (ETFs) in the fourth quarter, marking the fifth consecutive quarter of net outflows. ...
Next-generation electric fracturing system improves efficiency, ESG performance (Source: World Oil on January 2024: SPECIAL FOCUS- Hydraulic Fracturing) - Hydraulic fracturing has experienced rapid transformation over the last several years. The market of the early 2000s and 2010s is a distant memory. In today’s energy economy, operators are seeking to increase value while reducing cost and non-productive time (NPT). Traditional oil and gas energy sources are competing against other investment opportunities and investors are asking energy companies to focus more on returns, cash flow and capital discipline. This focus on financial performance starts at the wellhead, where energy producers look at the cost of a barrel of oil and focus on levers that allow them to reduce the cost of production. This pressure is pushed down through the supply chain, including service companies, suppliers and original equipment manufacturers (OEMs). An ongoing change in the industry is underway to ensure greater better returns. ...
ESG Loan Bubble Close To Bursting (Source: Oil Price on 27 November 2023): By Irina Slav - Sustainability-linked loans, or SLLs, have only been around for a few years. In that short time, they have ballooned into a market worth $1.5 trillion. But now, as scrutiny comes for sustainability claims with no substance, that market faces a reckoning. And so do the banks that lent those money. The first sustainability-linked loan was the work of Dutch ING Groep and was closed in 2017. Since then, sustainability-linked loans have become the second-largest ESG market in the world, after so-called green bonds. The essence of SLLs is that the borrower can benefit from a slightly lower interest rate in exchange for undertaking commitments in the environmental department—a principle that’s pretty similar to how ESG investment funds operate. But just like ESG investment funds, regulators—and investors—have now started to question the validity of sustainability-related claims by bond issuers and bank borrowers. ...
ESG Investments Face Financial Hurdles (Source: Oil Price on 7 October 2023): By Felicity Bradstock - After several years of enthusiasm around environmental, social, and governance (ESG) investment, some financial experts are becoming increasingly pessimistic about the return on investment. There was a great deal of hype around sustainable or ESG investment in 2020 and 2021, as governments worldwide showed great support for a global green transition. Investment companies quickly labelled many of their funds as sustainable, as well as creating new ESG funds, to attract companies looking to “go green”. However, a poor return on investment over the last couple of years has made many financial experts wary of continuing to invest in these types of funds, as they are unwilling to take the wait-and-see approach. ...
Yale Study: ESG Investing Isn’t Doing Much For The Environment (Source: Oil Price on 2 July 2023): By City A.M - ESG or environmental, social and governance investing is facing troubles. Higher bond yields drove an astonishing £304m out of the sector in May. This largely reflects a natural market dynamic – investors are chasing higher returns by moving from shares to bonds. Yet perhaps there should be some deeper angst at play. Is ESG investing really everything it is cracked up to be? It’s easy to understand the underlying appeal. Putting your savings into “good” companies, rather than those amoral profit-seeking entities, feels righteous. But it’s worth unpacking what that means in practice. The companies that score the highest on ESG metrics, particularly on the environmental side, are the ones that have a relatively low level of carbon per pound of revenue. That means the likes of financial services, healthcare and digital are “green”. By contrast, companies that produce building materials, fertiliser or energy are “brown”. The result of ESG investing is the transfer of capital from good to bad companies – thus it is meant to incentivise “brown” companies to reduce their emissions. ...
Major Oil And Gas Projects To Appease ESG Investors (Source: Oil Price on 20 October 2021): By ZeroHedge - Ever since the arrival of the ESG craze, we have discussed the change in "optics" that Exxon has been trying to pull off in order to placate some of the most vocal activist shareholders, some of whom now happen to be on the company's board. But now, instead of just purely superficial changes, Exxon may be on the cusp of making fundamental changes as well as the oil and gas major is considering whether or not to shutter "several major oil and gas projects", according to a new report from the Wall Street Journal. The company's board, which includes three directors nominated by activist investors, has "expressed concerns about certain projects, including a $30 billion liquefied natural gas development in Mozambique and another multibillion-dollar gas project in Vietnam," the WSJ reports, while caveating that the impact from these projects coming online likely wouldn't have been felt for years to come. ...
