ESG metrics are a set of environmental, social, and governance indicators that are used to evaluate the sustainability and ethical impact of an investment or business. These metrics are used to assess a company’s performance in areas such as carbon emissions, diversity and inclusion, labor practices, board independence, and transparency.
Environmental metrics may include carbon emissions, energy efficiency, water usage, waste management, and biodiversity impact. Social metrics may include labor practices, human rights, community impact, product safety, and customer privacy. Governance metrics may include board independence, executive compensation, shareholder rights, and anti-corruption policies.
ESG metrics are used by investors to evaluate companies’ risk exposure, reputation, and long-term growth potential. They are also used by companies themselves to identify areas for improvement and to communicate their sustainability performance to stakeholders.
There are several ESG rating agencies that provide standardized ESG metrics and ratings for companies, such as MSCI, Sustainalytics, and RobecoSAM. These agencies use a variety of data sources, including company reports, news articles, and stakeholder surveys, to assess companies’ ESG performance and assign ratings or scores.