The purpose of ESG
ESG (Environmental, Social & Governance) is a risk management framework which measures the sustainability and societal impact of a company and helps determine future financial performance. Environmental criteria focus on how a company considers its stewardship obligations towards the natural environment. Social criteria evaluates how a company fosters its people and culture and the effect of this on the broader community. Governance refers to rules or principles defining rights, responsibilities, and expectations between different stakeholders in the governance of corporations. The purpose of ESG analysis is to consider how companies serve society and how this impacts their current and future performance.

Why its Growing in Importance
Increased environmental consciousness, social change and the reformation of corporate governance structures has compelled investors to think more carefully about the potential environmental and societal harms associated with a company's activities. There is growing recognition that the financial sector has a pivotal role to play in meeting global targets, such as those laid out in the United Nations Sustainable Development Goals.

What is there to gain
Beneficiaries and clients are calling for greater transparency about how and where their money is invested, and investors have a responsibility to understand and incorporate their ESG preferences. There is also increasingly compelling evidence that higher ESG ratings align with long-term financial performance. Finally, regulation designed to drive capital towards sustainable investments has increased because of the realisation that the financial sector can play an important role in meeting global challenges such as climate change, modern slavery and tax avoidance.
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