The ESG rating , an acronym that stands for Environmental, Social and Governance , contains a series of evaluation elements used in the financial sector that allow the sustainability of investments to be judged from a global company assessment perspective that goes beyond purely economic results.
In other words, when evaluating an investment or the risk/return profile of portfolios, it is increasingly common to also take into account performance with respect to specific ESG criteria .
What is ESG rating?
The ESG rating (or sustainability rating) therefore recent mobile phone number data expresses a synthetic judgment that certifies the solidity of an issuer, a security or a fund from the point of view of commitment in the environmental, social and governance areas.
It refers to the environmental impact of parameters such as:
Carbon dioxide emissions
Efficiency in the use of natural resources (such as water)
Attention to climate change
Population growth
Biodiversity
Food safety
The social sphere, however, includes others such as:
Respect for human rights
Working conditions, for example, the use of child labor in production
Attention to equality and inclusion in the treatment of people
Supply chain control.
Finally, the scope of governance includes:
The presence of independent directors
Diversity policies (gender, ethnic, etc.) in the composition of the Board of Directors
Senior management remuneration linked to sustainability objectives
An investment is defined as sustainable and responsible what is tone of voice if it creates value for the investor and for society as a whole through a medium-long term strategy that, in the evaluation of companies and institutions, integrates financial analysis with ESG analysis.
Some investments are explicitly identified by the acronym SRI, which stands for Sustainable and Responsible Investment . However, they are not actually equivalent.
What are the differences between ESG and SRI?
Despite being similar, ESG and SRI investments differ in the premises that form their logical foundations. The former, in fact, consider the potential of the entities involved to improve indicators of inclusion and circularity in the use of resources .
The latter, however, place ethics above any other value and evaluate the actions that companies have already undertaken (not those they will carry out) to improve the parameters of environmental sustainability and social equity.
While the ultimate goal remains profit generation, the moral fax lead categories and areas of positive impact of companies’ activities are even stricter in the case of SRI investments.
Respect for rights
The World Economic Forum recently introduced a tool to assess ESG ratings with more precise and shared benchmarks. It is a set of metrics to give a more objective measure of so-called stakeholder capitalism .
Developed by the WEF in collaboration with Bank of America, Deloitte, EY, KPMG and PwC , they include environmental, social and governance indicators and communications for financial markets, investors and society. They revolve around the core principles of ESG (governance, planet, people, prosperity) and align with existing standards.
Stakeholder capitalism – said Schwab – is today a preferable model to stakeholder capitalism and state capitalism, because ” it is the best response to social and environmental challenges “.
The genesis of the ESG rating
Through stakeholder capitalism, business leaders can go beyond legal obligations and uphold their duty to society . “They can bring the world closer to achieving shared goals, such as those that emerged with the Paris climate agreement or the SDGs ,” Schwab stressed, the United Nations Sustainable Development Goals.
The WEF therefore described the publication of the new metrics as a “milestone”.
These benchmarks constitute a “universal” reporting system, because they are suitable for any productive sector and geographic region , and offer common metrics and homogeneous reporting to help companies solidly demonstrate the creation of long-term value with their sustainability policies and the quality of their contribution to the SDGs.