Money Minute: What is ESG?
CIBC Asset Management
“Environmental, Social, and Governance, or “ESG”, are factors to consider when looking at companies through a responsible investment lens. Here’s a quick look at each factor and what it includes.
First, there's environmental factors which address issues related to the environment and take into account any related risks facing the company and its mitigation of these risks. These may include climate change, natural resource use, waste management and environmental opportunities.
Social factors look at a company’s business relationships, how it treats its workforce, or human capital,, product safety, privacy and data security, supply chain, community relations.
Governance factors include corporate governance (board structure, diversity, quality), business ethics, compensation, and disclosure.
Governance is the most important factor. Looking at a company through an ESG lens can help identify opportunities and risks (perhaps rising costs), which help us value a company more accurately. This is why we believe portfolio managers, like us, and investors can benefit by taking them into account.”
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