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Environmental, Social and Governance (ESG)

An analysis method used by socially responsible investors to help them evaluate possible investments in an effort to increase long-term, risk-adjusted financial returns. Environmental criteria take into account a company's environmental protection efforts, such as corporate climate change policies including things like carbon emissions, environmental laws, water stress, and waste. The management of relationships with customers, suppliers, employees, and the communities in which it operates is examined under the social criteria. Governance refers to elements that affect how businesses and investee entities are managed and supervised, such as board composition and compensation, audits, internal control, and shareholders rights. Regardless of whether a strategy has a sustainable mandate, environmental, social, and governance (ESG) integration is the process of incorporating ESG information into investing choices to assist improve risk-adjusted returns. ESG and "sustainable investing" are terms that are frequently used interchangeably.

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