ESG is a catch-all term for investing strategies that consider a company’s environmental, social and governance factors. The term first entered public consciousness through the Who Cares Win report in 2005. Ever since then, it has become one of the criterias to be included in financial evaluation of companies.
The ESG framework serves as a guide for companies to operate in a responsible and sustainable manner. It is essential so corporations can strike a balance between generating profits for shareholders and contributing to the development of society. It is increasingly clear that financial success isn’t the only benchmark for prosperity anymore, as societal well being is an increasingly vital component in measuring success.
In a 2021 article by Bloomberg, it is estimated that ESG assets may hit $53 trillion by 2025 which proves just how crucial adopting ESG practices is in corporate governance for long term financial performance. Risk associated with environmental and societal difficulty can also be assuaged.
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Sources :
Who Cares Win Report : https://www.ifc.org/en/insights-reports/2000/publications-report-whocareswins2005--wci--1319576590784#:~:text=The%20Who%20Cares%20Wins%20conference,in%20asset%20management%20and%20financial
ESG Malaysia website : https://esgmalaysia.org/
Bloomberg Article : https://www.bloomberg.com/professional/insights/markets/esg-assets-may-hit-53-trillion-by-2025-a-third-of-global-aum/?ref=financealliance.io