ESG science what is ESG?

ESG is the abbreviation of Environmental, Social and corporate Governance, and it is a new investment concept and enterprise evaluation standard that pays attention to corporate environment, social and corporate governance performance rather than financial performance.

ESG evaluation aims to find enterprises that care about the environment and have social responsibilities. Compared with the traditional investment decision aiming at financial performance, ESG advocates a business model that can bring long-term sustained returns, and mainly examines three non-financial indicators: environmental factors, social responsibility and corporate governance. In practical application, ESG investment can also be called sustainable socially responsible investment (SRI), which emphasizes the concept of social sustainable development.

ESG mainly evaluates enterprises from three aspects: in the environmental aspect, it mainly considers the impact of enterprises on the environment, such as how enterprises manage and control the discharge of various pollutants in the production process (including direct pollution generated by their own production and operation and secondary pollutants generated by upstream and downstream) and the disposal methods of wastes; In terms of social responsibility, we mainly consider the various influences of enterprises on society, such as employee management, welfare and salary, employee safety, relations with upstream and downstream suppliers and service providers, and product safety. In corporate governance, we mainly consider the organizational structure of the company, the interest relationship between shareholders and management, whether there is corruption and financial fraud, the transparency of information disclosure and business ethics. Generally speaking, companies with good ESG performance usually have the characteristics of low valuation, high profit, stable stock price and dividends.

For investors, based on ESG evaluation, investors can observe the ESG performance of enterprises, evaluate their investment behavior and the contribution of enterprises (investors) in promoting sustainable economic development and fulfilling social responsibilities. You can also have a more comprehensive understanding of the potential of the enterprise and pay attention to the present and the future.

For enterprises, improving the management level of ESG can enhance their ability to cope with the crisis. Good ESG performance is an intangible asset. If an enterprise discovers the negative impact of its production process on the environment earlier, it can reduce the high fines imposed by the regulatory authorities for environmental violations in the future. Building a product quality control and supply chain management supervision system faster will reduce the possibility of future product quality and safety problems and customer complaints. Therefore, ESG's investment and development concept is increasingly sought after by domestic and foreign financial institutions and enterprises, and has achieved rapid development.