INGENIEUR
Volkswagen ’ s emissions tests scandal , Facebook ’ s misuse of data and other recent incidents have caused significant financial damage to these companies .
INGENIEUR
Volkswagen ’ s emissions tests scandal , Facebook ’ s misuse of data and other recent incidents have caused significant financial damage to these companies .
the legal duties imposed on investment decisionmakers .
As public awareness of the environmental and social impacts of corporate activity has grown , the attitude of capital markets to ESG investment appears also to have evolved . As a result , investment with regard to ESG performance is becoming increasingly mainstream . A 2005 survey of 195 fund managers from around the world by Mercer Investment Consulting revealed that the use of positive screening for environmental , social and ethical factors is entering mainstream investment analysis particularly where such screening may potentially yield superior financial performance by targeting companies that adopt socially responsible practices and thereby avoid future liabilities and losses . The study revealed that 70 % of fund managers believe the integration of environmental , social and ethical factors into investment analysis will become a mainstream part of investment management
The “ G ” in ESG refers to the governance factors of decision-making , from sovereigns ’ policymaking to the distribution of rights and responsibilities among different participants in corporations , including the Board of Directors , managers , shareholders , and stakeholders .
The purpose of the corporation , the role and makeup of the Board of Directors , and the compensation and oversight of top executives have emerged as core issues in companies ’ corporate governance structures .
When analysing environmental , social , and governance factors , the “ G ” element is often forgotten amid considerations over climate risk , societal implications and other “ E ” and “ S ” risks and opportunities . However , understanding governance risks and opportunities in decisionmaking is critical , as poor corporate governance practices have stood at the core of some of the biggest corporate scandals .
Volkswagen ’ s emissions tests scandal , Facebook ’ s misuse of data and other recent incidents have caused significant financial damage to these companies . In the face of companies ’ missteps and expanding awareness of global diversity and income inequality , corporate governance is a core component of ESG .
THE “ G ” FACTOR
The " G " in ESG pertains to the governance factors of decision-making , from sovereigns ’ policy making to the distribution of rights and responsibilities among different participants in corporations , including the Board of directors , managers , shareholders and stakeholders . Governance factors indicate the rules and procedures for countries and corporations , and allow investors to screen for appropriate governance practices as they would for environmental and social factors . A corporation ' s purpose , the role and makeup of the Board of Directors , shareholder rights and how corporate performance is measured are core elements of corporate governance structures .
S & P Global research on governance factors has shown that companies that rank well below average on good governance characteristics are particularly prone to mismanagement and risk their ability to capitalise on business opportunities
64 VOL 97 JANUARY - MARCH 2024