1 Apr 2022
Environmental, Social and Governance (ESG)
- Posted by Dejan Pekic BCom DipFP CFP GAICD, Senior Financial Planner
Environmental, social and governance (ESG) is an approach to evaluating the extent to which a company works on behalf of social goals that go beyond the role of a company to maximize profits for shareholders.
Environmental considers how a company performs as a steward of nature. Social examines how it manages relationships with employees, suppliers, customers and the communities where it operates. Governance deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights.
Does adopting ESG criteria benefit?
Consider using the same ESG criteria to evaluate countries and a clear pattern emerges.
- Countries with better Environmental protections are linked to better economic outcomes
- Countries with better Social (educated workforce) are linked to better economic outcomes
- Countries with stronger Governance are linked to better economic outcomes
If it holds true at a country level then the expectation is that ESG will also produce better economic outcomes at a company level.
Click for charts.
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