What is ESG?
ESG stands for Environmental, Social and Governance — the three non-financial dimensions investors, regulators and customers use to judge how a company is run.
Environmental (E)
How a company affects the natural world: greenhouse gas emissions (Scope 1, 2 and 3), energy use, water, waste, pollution and biodiversity. Carbon is the most regulated topic, but resource use is rising fast.
Social (S)
How a company treats people: workforce composition and diversity, health & safety, training, fair pay, human rights in the supply chain, and impact on local communities.
Governance (G)
How a company governs itself: board composition and independence, executive pay, business ethics, anti-corruption, data privacy, regulatory compliance and how ESG itself is overseen at board level.
Why is it called ESG?
The term was popularised in a 2004 UN report 'Who Cares Wins'. It deliberately groups environmental, social and governance topics together because investors found that companies weak on any one pillar tended to underperform financially over time.
ESG vs sustainability vs CSR
- Sustainability is the broad goal of operating within planetary and social limits.
- CSR (corporate social responsibility) is the older voluntary, often charitable framing.
- ESG is the measurable, investor-grade and increasingly regulated framework for tracking it.
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