What does the acronym ESG stand for in investing?

The acronym ESG stands for Environmental, Social, and Governance. This concept has become increasingly important in the field of investing as it encompasses a set of criteria used by investors to evaluate the sustainability and ethical impact of their investments.

Environmental factors consider how a company performs as a steward of nature, including its waste management, resource conservation, and climate change efforts. Social criteria evaluate how it manages relationships with employees, suppliers, customers, and the communities where it operates, addressing issues such as labor practices, product safety, and community engagement. Governance looks at the leadership and overall governance structure of a company, focusing on transparency, ethics, executive compensation, and shareholder rights.

Recognizing ESG issues allows investors to identify companies that are not only financially sound but also responsible in their social and environmental practices. As a result, ESG investing has gained traction among investors seeking to align their investment strategies with their values and long-term goals.