ESG performance refers to a company’s performance in relation to environmental, social, and governance (ESG) factors. ESG performance is evaluated based on a set of ESG metrics, which assess a company’s sustainability and ethical impact.
ESG performance is important to investors because it can affect a company’s financial performance, reputation, and long-term growth potential. Companies with strong ESG performance are believed to be better equipped to manage risk, attract investment, and generate long-term value for their shareholders.
ESG performance is typically evaluated using a variety of ESG metrics, such as carbon emissions, labor practices, board independence, and transparency. These metrics are used to create ESG ratings or scores, which are assigned by ESG rating agencies such as MSCI, Sustainalytics, and RobecoSAM. ESG ratings are often used by investors to evaluate companies’ sustainability performance and to make investment decisions.
In addition to financial performance, companies are increasingly being evaluated on their ESG performance by a range of stakeholders, including customers, employees, and regulators. Companies with strong ESG performance are likely to have a more positive reputation and be more attractive to these stakeholders.