(ESG)

Definition

ESG stands for Environmental, Social, and Governance. It is a set of criteria used to evaluate a company's operations and performance in these three areas important to stakeholders.

5 Must Know Facts For Your Next Test

1. ESG factors are increasingly considered by investors when making decisions about which companies to invest in.
2. Corporate boards are responsible for ensuring that companies adhere to ESG principles.
3. Strong ESG practices can lead to better risk management and long-term financial performance.
4. Poor ESG practices can result in reputational damage, legal issues, and financial losses.
5. There is growing regulatory pressure globally for companies to disclose their ESG practices.

Review Questions

• What does ESG stand for and why is it important in corporate governance?
• How can strong ESG practices impact a company's financial performance?
• What role do corporate boards play in implementing ESG principles?

Related terms

Sustainability: The practice of maintaining processes that do not deplete natural resources or harm environmental quality.

Corporate Social Responsibility (CSR): A business model in which companies integrate social and environmental concerns into their operations.

Stakeholder Theory: A theory of organizational management that emphasizes the importance of considering all stakeholders' interests, including shareholders, employees, customers, and the community.