You keep seeing these letters pop up everywhere. Everyone is talking about it, companies are basing entire strategies around it – and by all measures, it’s here to stay.

So, what is ESG? and why should you care? Let’s start with the basics.

1. Environmental

Increasingly corporations of all sizes are becoming concerned with how their day-to-day activities are impacting the environment. The obvious examples here are those involved in natural resources such as oil, mining for minerals and heavy industry.

Things to think about include pollution, waste management, deforestation etc.

2. Social

This is the measure that covers how well corporation’s treat their employees, manage relationships with suppliers. Really importantly, the relationships they have with their customers and of course the communities within which they operate – are they a force for good?

3. Governance

This deals with the actual operation of the corporation in question. How well is the corporation managed? how competent is the leadership team? Is the remuneration policy fair? How well are shareholders treated?

These are very simplified explanations, but you get the gist. So why does this matter?

ESG conscious investors now want to measure how corporations perform against the above criteria before investing…now you hopefully understand why this is so important.

It is very much a response to particularly the younger generation of investors who want to align their investments with their values.

At the very heart of ESG is sustainability, there is a giant push to encourage corporations to take on a more responsible approach to how they operate. We are all stewards of the future, so we have a duty to ensure our impact on the planet, our communities and society is positive.

More recently agencies are appearing that measure corporation’s ESG performance and giving them a rating much like the credit ratings agencies.

If you are going for an interview or have recently started a new job, we strongly recommend that you take this seriously – it will expected of you when you start.

Look out for future blogs that will cover ESG.