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When evaluating the sustainability and social impact of investments, investors utilize a set of environmental, social, and governance (ESG) criteria. Environmental, social, and governance, or ESG, aspects are used to gauge the ethical and sustainable impact of businesses and investments.
The carbon footprint, energy use, and waste management techniques of a corporation are only a few examples of environmental criteria. A company's treatment of employees, impact on the community, and human rights and labor practices policies are only a few examples of social criteria. Governance standards take into account things like a company's management structure, board diversity, and financial reporting transparency.
ESG criteria are used by analysts and investors to assess the sustainability and social effect of businesses and investments and to make investment decisions that take into account more variables than just financial performance. Since investors' interest in the environmental and social effects of their investments has increased, ESG investing has grown in popularity in recent years.
Stocks, bonds, and mutual funds are just a few of the investments that can be evaluated using ESG criteria. In addition to the numerous third-party rating agencies that offer ESG ratings and analyses, several investment businesses and financial institutions have created their own ESG frameworks and criteria.
