ESG and Sustainability – What’s the Difference - PowerPoint PPT Presentation

About This Presentation

ESG and Sustainability – What’s the Difference


In recent months, more and more asset owners have been asking whether they should include environmental, social, and governance (ESG) issues in the investment decision-making process. This is because of the growing sensitization on the need to incorporate ESG criteria in the corporate environment. Well, the first step for an investor is to differentiate between the ESG practices and sustainability goals. To know more, visit: – PowerPoint PPT presentation

Number of Views:181


Transcript and Presenter's Notes

Title: ESG and Sustainability – What’s the Difference

  • ESG and Sustainability Whats the Difference?

In recent months, more and more asset owners have
been asking whether they should
include environmental, social, and governance
(ESG) issues in the investment decision-making
process. This is because of the growing
sensitization on the need to incorporate ESG
criteria in the corporate environment. Well, the
first step for an investor is to differentiate
between the ESG practices and sustainability
Understanding ESG
ESG is an abbreviation for environmental, social,
and governance issues. It refers to the factors
of companies' operations that are not financial
in nature but affect their long-term business
The term "environmental" refers to climate change
mitigation or adaptation and other forms of
environmental degradation.
The term "social" refers to both labor standards
and the social relations in the supply chain
(e.g., exploitation, child labor) as well as
human rights, including gender equality and
access to essential services (healthcare, water,
The term "governance" refers to the social and
environmental performance of companies and the
quality of governance structures that sit above
What is ESG, and how is it similar to
ESG is closely related to the Sustainability of
business practices as they always go hand-in-hand
with each other. The more sustainable a company's
activities are, the higher its ESG rating.
Typically, "Sustainable" is defined by the UN
Global Compact as development that meets the
needs of the present without compromising the
ability of future generations to meet their own
Sustainability involves both environmental and
social issues as well as the company's long-term
financial health. A sustainable company delivers
value to society through ethical business
behavior and is one that will be around for the
long term. 
- Both have a common goal to help companies and
their shareholders do well without harming
society or the environment.- They both offer a
solution to a problem in our lives ESG can raise
awareness about certain issues while
Sustainability is more focused on stopping the
problems from occurring rather than just making
sure it doesn't worsen.
Typically, ESG and Sustainability have the
following similarities?
  • The Difference Between ESG and Sustainability
  • Now that we have defined ESG, let's look at the
    key differences between ESG and Sustainability
  • First of all, ESG is an approach to investing
    that analyzes companies on environmental, social,
    and governance (ESG) factors which are not
    related to climate change or environmental
    issues. This puts the focus on responsible
    behavior, fairness, and integrity.
  • ESG is about company identity, stakeholders, and
    decision-making whereas Sustainability focuses
    on the relationship between the company and the
  • ESG is a subset of Sustainability, but some
    companies would not be considered sustainable if
    they did not also have good ESG policies.

  • ESG is standardized it's quantifiable on an
    index or on a scale from 0 to 100. This means you
    can benchmark your performance against other
    companies and get a sense of how you compare.
  • Sustainability is hard to measure and harder
    still to know if you're doing it well since
    this is highly subjective and there's no
    consensus on what good performance looks like.
  • Sustainability focuses on the environment,
    climate change, and environmental issues which
    can all be costly for companies to manage.

  • Another difference is that sustainable companies
    can include those with poor or even terrible ESG
    scores, whereas an ESG investment will not
    include a company with poor financials this is
    often referred to as "the put" if you want to
    invest in the company, the ESG score must be
    in-line with your goals.
  • Finally, ESG is still an emerging field for most
    investors, while Sustainability has been around
    for long. Sustainability investing also tends to
    look at different types of metrics than ESG (such
    as economic profit). However, many investors are
    looking at how to combine ESG with Sustainability
    for the best portfolio returns.

  • Why ESG is here to stay data-backed benefits
  • As the issue of Sustainability grows in
    importance, more and more companies are employing
    sustainable practices to improve their
    attractiveness to investors. The result is that
    it's not only the financial analysts focusing on
    company fundamentals but also ESG rating
    agencies. If a business is environmentally or
    socially responsible, it will be financially

  • But don't take our word for it let's look at
    the data
  • According to Mercer, the US SIF Foundation, and
    Broadridge Financial Solutions study last
    year, ESG investment criteria can improve
    financial performance
  • - 53 of respondents said their company's
    financial performance had improved since using
    ESG considerations in business strategies and
    capital allocation and
  • - 52 reported that the market demand for
    sustainable investment products was increasing.

  • A 2016 study by the University of Cambridge and
    Boston Common Asset Management found that ESG
    considerations can improve a company's
  • - Companies with good ESG ratings have higher
    valuations than those with poor ones
  • - Companies with strong ESG practices have been
    more resilient to downturns in the market and
  • - Companies with strong ESG ratings have lower
    costs of capital, suggesting that financial
    markets view them as being more valuable.

  • Further proof comes from the 2017 study by CFA
    Institute (Chartered Financial Analyst)
  • -72 of surveyed investors said they would
    include ESG issues in their investment process
    within the following five years.
  • Transition to ESG
  • Integration of ESG factors in investment
    strategies is also considered by many as the
    shift towards sustainable investment. The main
    areas where investors seek to incorporate ESG

  • (1) Companies' environmental practices
  • ESG investors believe that irresponsible
    environmental practices may adversely affect the
    intrinsic value of a company's stock, and
    therefore seek to make investments in large
    companies with good environmental records.
  • (2) Diversity and equality
  • ESG investors believe that diversity and equality
    in the workplace can lead to a more productive

  • (3) Human rights?
  • ESES investors believe that allowing employees to
    exercise their human rights freely increases the
    employee's level of satisfaction and
    thus productivity.?
  • (4) Anti-corruption measures
  • ESG investors believe that companies with
    anti-corruption measures have a competitive
    advantage over companies without.
  • (5) Company's governance practices
  • ESG investors believe that good corporate
    governance practices contribute to a company's
    stability, provide it with a competitive
    advantage, and increase its share price.

  • Enjoy 1000s of in demand courses, livelabs,
    workshops, real time chat with instructors and
    much more!!

Start your 5-day free trial https//go.starweaver
For more information, visit https//
mWrite to us
Write a Comment
User Comments (0)