What is environmental, social, and  governance (ESG)

Environmental, social and governance (ESG) is a term used to represent an organization's corporate financial interests that focus mainly on sustainable and ethical impacts. Capital markets use ESG to evaluate organizations and determine future financial performance. While ethical, sustainable and corporate governance are considered non-financial performance indicators, their role is to ensure accountability and systems to manage a corporation's impact, such as its carbon footprint.

 

ESG is an umbrella term that refers to specific data designed to be used by investors for evaluating the material risk that the organization is taking on based on the externalities it is generating. The data produced can also be used within an organization as metrics for strategic and managerial purposes.