ESG is measured against three criteria.
The environmental criteria measure the direct or indirect impact of a company’s activity on the environment. This may include things like greenhouse gas emissions, waste recycling, energy consumption, risk prevention, and respect for biodiversity.
The social criteria measure the direct or indirect impact of a company’s activity on its stakeholders (for example, employees, clients, communities) in line with universal values. These may include human rights or international labour standards. In practice, this criterion considers things like the ratio of male/female representation within the company, access to training, employee rights, and the employment of those from minority backgrounds and those with disabilities. You can consider this when making ESG investments.
Finally, the governance criteria consider the way in which a company is managed and controlled. This covers the role of shareholders, transparency of executive pay, management structure, audit committees, and more.