ESG, Environmental, Social and Governance criteria

Definition

The ESG criteria refer to the anglicism Environmental, Social and Governanceand they tell us about the environmental, social and corporate governance factors that determine business investments and their sustainability.

A company's ESG strategy cuts across many areas of the organization, requiring multiple areas to work together toward common goals.

Context

In Spain there is a Regulatory framework for the publication of non-financial information of companies. In fact, large companies and public interest entities have the obligation to publish such information, which is of increasing interest to the general public and, above all, to corporate investors.

The general awareness about how business corporations manage environmental issues is a fact. Furthermore, environmental sensitivity can condition consumption habits and purchase decisions in relation to a brand.

Business leaders see ESG challenges as an imperative: taking them on will make a difference and create opportunity.

Criteria

For all these reasons, we can specify the ESG criteria So:

·        Environment:lhe environmental criteria include business activities with a positive impact on the environment.

·        Social: These criteria have social effects in a broad sense, from diversity and equal opportunities to working conditions.

·        Governance: encompasses the corporate governance of the company, its corporate quality, culture and management processes.

Beginning

Each type of criterion responds to some implicit principles:

·        Environmental: climate change and emission reduction, rational use of water, biodiversity, energy efficiency, reforestation, waste management and circular economy.

Social: customer satisfaction, gender equality and diversity, support for vulnerable groups and social assistance, health and safety at work, contributions to the community, training and human rights.

·        Corporate governance: corporate governance system, remuneration, cybersecurity, responsible supply chain and compliance systems.

ethical investments

The Socially Responsible Investment (SRI) or sustainable investment it is nothing new. Its origin dates back to the late 1960s, when college students opposed to the Vietnam War demanded that their college financial portfolios not include investments in military companies.

Since those first sustainable investments we have now reached the ethical investments, based on ESG criteria.