Concept: ESG

#24

What

1. ESG - Environmental, Social, and Governance Criteria
2. Set of standards used by a company's investors to evaluate future investments
1. Environmental: how does a company perform while being conscious about nature
2. Social: how does a company manage relationships with employees, stakeholders, customers, and partner communities
3. Governance: how does a company perform vis-a-vis its leadership, shareholder rights, audits,  and internal operations

Also known as:

1. Socially Responsible Investing (SRI)
2. Sustainable investing
3. Impact investing

How It Works

Environmental criteria:

1. Investors usually audit a company’s:
1. Energy use
2. Amount of waste generated
3. Pollution levels
4. Natural resource conservation behaviour
5. Treatment of animals
2. Environmental risks evaluated:
1. Ownership of contaminated land
2. Disposal of hazardous waste
3. Toxic emissions management
4. Compliance with government environmental regulations

Social criteria:

1. Investors usually evaluate a company's:
1. Business relationships
2. Criteria of working with suppliers that hold the same values as the company
3. Donation policy for profits
4. Volunteering opportunities for employees in local communities
5. Policies for health and safety of its employees
6. Consideration for and category of the interests of its various stakeholders

Governance criteria:

1. Investors assess if a company: 
1. Utilizes accurate and transparent accounting methods 
2. Provides its stockholders an equal opportunity to vote on important issues
3. Avoids conflicts of interest for choosing board members
4. Avoids employing political influence for partial treatment
5. Avoids engaging in illegal practices

Examples

Examples of companies who did not abide by the ESG criteria and were thus deemed risky to invest in:

1. BP's 2010 oil spill
2. Volkswagen's emissions scandal

Investors

Companies and financial institutions that evaluate companies using the ESG criteria to determine their potential investments:

1. Boston-based Trillium Asset Management
2. JPMorgan Chase
3. Wells Fargo
4. Goldman Sachs

Introduction

#1

Welcome to a world of Money, Money, Money!

This blog contains posts on various topics related to finance, such as the following:

1. Accounting basics
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3. Econometrics
4. Economics basics
5. Good books to explore
6. Famous folks in finance
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8. Scandals
9. Security analysis
10. Valuation

In this blog, I do not plan to talk about theories and concepts in a verbose manner.

What I'd rather attempt is to achieve a fun-filled way to approach the world of finance, a 'finance made easy' concept, if you will.

If you find the topics and the approach I've chosen interesting, you might retain some of them for a long time, and that's all I hope for.

If you do wish to read further on some of the topics, Investopedia is a great site, to begin with.

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