What is ESG Investing and why is it important?

1. What is ESG Investing and why is it important? Introduction to Environmental Social And Governance (ESG) ESG refers to environmental, social, and governance factors considered by companies when managing their operations, and investors when making investments, in respect of the risks, impacts, and opportunities. The word ESG was coined in 2004 in a report prepared by the United Nations Global Compact and the Swiss Federal Department of Foreign Affairs. ESG has gained increasing attention in last few year (mainly after Covid-19 pandemic) with many investors investing only in those companies that provide ESG performance reporting. It has highlighted the need of a more sustainable approach for companies to build their ESG investing performance to manage risks and build resilience. ESG may include following issues but not limited to. Environmental issues: potential or actual changes to the physical or natural environment (e.g. pollution, biodiversity impacts, carbon emissions, climate change, natural resource use) Social issues: potential or actual changes on surrounding community and workers (e.g. health and safety, supply chain, diversity and inclusion); and Governance: corporate governance structures and processes by which companies are directed and controlled (e.g. board structure and diversity, ethical conduct, risk management, disclosure and transparency), including the governance of key environmental and social policies and procedures. What is ESG investing Environmental, Social, and Governance (ESG) investing refers to the practice of considering a company's environmental, social, and governance practices and performance when making investment decisions. ESG investors seek to invest in companies that are leaders in sustainable and responsible business practices, and they often seek to avoid companies with poor ESG sustainability report. ESG investing is based on the idea that a company's ESG practices and performance can have an impact on its financial performance, and that companies with strong ESG practices are more likely to be successful and sustainable in the long term. ESG investing is a growing trend, and many investors and financial institutions now consider ESG factors as part of their investment analysis and decision-making process. ESG investing can be done through a variety of investment vehicles, such as mutual funds, exchange-traded funds (ETFs), and individual stocks. Why ESG reporting is important ESG reporting is the process by which companies provide information about their environmental, social, and governance (ESG) practices and performance to stakeholders, such as investors, customers, and regulators. ESG reporting is important for several reasons: It helps investors and other stakeholders to assess a company's sustainability and responsible business practices: By providing information about a company's ESG practices and performance, ESG reporting allows investors and other stakeholders to make more informed decisions about the company's business and its impact on the environment and society.

2. It can help companies to improve their ESG performance: By publicly disclosing information about their ESG practices and performance, companies may be motivated to improve their practices in order to meet the expectations of investors and other stakeholders. It can help to promote transparency and accountability: ESG reporting helps to promote transparency and accountability by requiring companies to publicly disclose information about their ESG practices and performance. This can help to build trust and confidence in the company and its business practices. It can help to reduce risk: Companies with strong ESG practices may be less vulnerable to risks such as regulatory changes, supply chain disruptions, or reputation damage, which can affect their financial performance. By considering ESG factors, investors can potentially reduce risk in their portfolios. It can help to drive the transition to a more sustainable and responsible economy: By promoting the importance of ESG practices and performance, ESG corporate governance can help to drive the transition to a more sustainable and responsible economy.