ESG
Back to GlossaryDefinition
Criteria or a set of standards for a company’s operations that socially conscious investors use to screen potential investments.
Summary
ESG stands for Environmental, Social, and Governance - a framework used to evaluate how well organizations manage their impact on the environment, treat their stakeholders, and maintain ethical leadership practices. ESG criteria help investors, consumers, and other stakeholders assess a company's sustainability and ethical performance beyond just financial metrics. Environmental factors include climate impact and resource usage; Social factors cover employee treatment, community relations, and human rights; Governance involves board diversity, executive compensation, and transparency.
Usage Context
Understanding ESG is crucial when studying modern business strategy, investment analysis, risk management, corporate governance, and sustainable business practices. It's particularly important in discussions about stakeholder capitalism, long-term value creation, and regulatory compliance.
Common Confusions
- Thinking ESG is just about environmental issues (it includes social and governance too)
- Confusing ESG with CSR - ESG is broader and more measurable
- Believing ESG is only for large corporations (applies to all organizations)
- Assuming ESG investing means sacrificing financial returns
- Thinking ESG is just a marketing trend rather than a fundamental business framework
