ESG

ESG stands for environmental, social and governance — a framework for assessing companies on factors absent from financial statements, such as emissions, working conditions and board composition.

It emerged from recognising that these factors eventually reach the accounts. Environmental rules raise costs, labour disputes halt production, and governance failures destroy shareholder value.

Long-horizon institutions such as pension funds weight it heavily. When you must hold for decades, sustainability matters more than immediate profit.

Criticism exists too. Ratings differ sharply between agencies, and greenwashing — promotion without genuine improvement — is a recurring problem. The lack of a unified standard makes comparison difficult.

For an investor, the practical stance is treating ESG as a risk checklist rather than a moral choice. Environmental litigation, labour disputes and owner risk are factors that genuinely move share prices.