ESG analysis is the process of evaluating a company’s environmental, social and governance (ESG) performance to assess its sustainability and societal impact. ESG analysis involves analyzing a company’s performance on a range of ESG issues, including climate change, human rights, labor practices, supply chain management, board composition and other related issues.
Environmental factors include things like a company’s carbon footprint, water usage, waste management and energy efficiency. Social factors include issues such as employee treatment, labor practices, human rights and community impact. Governance factors involve evaluating the company’s management structure, board composition, executive compensation and shareholder rights.
ESG analysis can help investors identify companies that are well-positioned for long-term success and have a positive impact on society and the environment. It can also help investors manage risk by identifying companies that may face regulatory or reputational challenges due to poor ESG practices.