ESG
ESG stands for Environmental, Social, and Governance — it's a framework used to assess how responsibly a business operates beyond just profits. ESG has become a major factor in investing, business strategy, and regulatory compliance.
Let’s break it down simply:
What Is ESG?
| Pillar | What It Covers | Examples |
|---|---|---|
| E – Environmental | Impact on the planet | Carbon footprint, energy use, waste, emissions |
| S – Social | Impact on people & communities | Employee welfare, diversity, human rights |
| G – Governance | How the company is managed | Board ethics, transparency, executive pay |
Why ESG Matters in 2025+
- Investors are prioritizing ESG-aligned companies for risk reduction and long-term value
- Regulators are enforcing ESG disclosures (especially in the EU, U.S., Canada)
- Customers are choosing brands that align with their values
- Employees prefer working for ethical, purpose-driven organizations
ESG in Business: What You Can Do
| Area | ESG Action Example |
|---|---|
| Environment | Use renewable energy, reduce packaging waste, offset emissions |
| Social | Support local communities, promote diversity, ensure fair wages |
| Governance | Improve transparency, set up ethical board structures, disclose risks |
You can build ESG practices into any business — whether it’s a tech startup, restaurant, real estate project, or manufacturing company.
ESG Investing: How to Invest in ESG-Aligned Companies
1. ESG ETFs
| ETF Name | Focus |
|---|---|
| ESGU (iShares) | Broad U.S. ESG exposure |
| SUSA (iShares) | U.S. ESG leaders |
| ESGV (Vanguard) | Global ESG companies |
| ICLN | Clean energy focus |
2. Individual ESG Stocks
- Tesla, Enphase – Clean energy
- Salesforce, Adobe – Strong social/governance performance
- Unilever, Patagonia (private) – Sustainability leaders
Use tools like:
- Morningstar ESG Ratings
- MSCI ESG Scores
- Sustainalytics
ESG Reporting & Certifications
For businesses, these are tools to build ESG credibility:
| Framework/Certification | Purpose |
|---|---|
| GRI / SASB / TCFD | ESG reporting standards |
| B Corp Certification | Verified ethical business status |
| CDP (Carbon Disclosure Project) | Climate risk disclosure |
| ISO 14001 | Environmental management systems |
Common Criticisms of ESG
-
Greenwashing: Some companies pretend to be ESG-aligned without real change
-
Subjectivity: ESG ratings can vary widely between providers
-
Performance debate: Some argue ESG may limit returns, others argue it reduces long-term risk
That’s why due diligence is key — ESG should be real, not just marketing.