2nd video (non existent for first 11 slides) Flashcards
Data, measurement, and disclosure
ESG data?
Aims at quantifying the sustainability of a firm by examining the environmental,
social, and governance (ESG) characteristics of a firm’s policies and products
E ? S ? G ?
Environmental: relationship between the firm and environment
Social: relationship between the firm and non-shareholding stakeholders (employees, customers, suppliers and business partners, government and regulators, creditors and lenders)
Governance: relationship between firm and shareholders. (A shareholder is any person, company, or institution that owns shares in a company’s stock. Shareholders also enjoy certain rights such as voting at shareholder meetings to approve the members of the board of directors, dividend distributions, or mergers.)
Where did the concept ESG originates from?
A man
Kofi Annan, was Secretary-General at the United Nations. (he studied at graduate institute at Geneva. )
in 2000, he started the UN global compact, which promotes responsible business practices and UN values among the global business community and the UN system
2005: he wrote the CEOs of 55 worlds leading financial institutions, inviting them to better integrate E, S, G issues in analysis, asset management and securities brokerage.
Two ways of looking at ESG? .6
Conduct vs products
———Conduct (processes, behaviour): how sustainable are the operations of a firm.
-e.g., does the firm’s operations cause environmental damage? Is the firm
respectful of human rights in its supply chain? Are employees satisfied? Does
the firm have a good health and safety record? etc
———Products: are the products and services of a company contributing positively to sustainability?e.g., clean energy, water sanitation, pollution prevention, access to education versus fossil fuels, tobacco, alcohol, gambling, arms production, etc.
What are commonly analysed ESG issues?
Environmental:
Air and water pollution, biodiversity, carbon emissions and intensity, climate change strategy, deforestation, energy efficiency, environmental management systems, waste management, water scarcity and efficiency.
Social:
Child labour, community relations, customer and product responsibility, customer satisfaction, data protection and privacy, employee engagement, gender and diversity, human rights, labour standards
Governance: audit committee structure, board composition and independence, bribery and corruption, business ethics, ESG incentives, executive compensation, lobbying, political contributions, whistleblower schemes.
ESGs are often interlinked. Therefore, it can be challenging to classify and ESG issue as only E,S, or G.
Not all ESG issues can be measured.
Often hard to assign exact monetary value to ESG issues.
