UHNWI & Life

ESG – Environmental, Social, Governance

written by

Kevin Underwood

Management

ESG – Environmental, Social, Governance

Orientierung

5. ESG and corporate governanc

6. ESG and the capital market

These three terms are playing an increasingly important role, both for investors and for companies themselves. We offer ESG solutions for companies that want to be sustainably successful. With the right sustainability strategies, you can increase the value of your company. ESG – Environmental, Social, Governance, let’s take a look at what that means.

What does ESG mean - Environmental, Social, Governance

ESG, ranges from climate change and workforce diversity to sustainable financing strategies. The trend towards taking responsibility has manifested itself among the executives of well-known companies. This is because ESG has evolved from a risk and compliance issue to a lever of value creation. Executives have recognized that sustainability, when implemented correctly, is an opportunity – for more growth, profitability and higher company value.

Let's take a look at the definition of the term ESG

Definition of terms: The term „ESG“ has established itself as the standard for sustainable investments. These three letters describe three sustainability-related areas of corporate responsibility:

The „E“ for Environment, for example, stands for environmental pollution or hazards, greenhouse gas emissions or energy efficiency issues (Environment).

Social („S“) covers aspects such as health and safety in the workplace, diversity or social commitment (Corporate Social Responsibility).

Governance („G“) refers to sustainable corporate management. This includes topics such as corporate values or management and control processes (corporate governance).

Source: Own presentation based on Schindler: Nachhaltige Kapitalanlagen – Chancen nachhaltig nutzen; Frankfurt a.M., 2018. p. 20.

ESG as a generic term for CSR - Corporate Social Responsibility

For our German readers, I would like to translate the meaning of ESG – Environmental, Social, Governance – into German. It means that companies should shape the environment, social issues, i.e. stakeholders, and corporate governance in a sustainable way. It is about voluntary responsibility and sustainable action that is more consistent than the legal requirements demand.

But what exactly does this mean in practice?

Of course, you first have to look at the company you want to advise, as there are various criteria according to which a company can be assessed in the context of ESG. For a company from the energy sector, for example, the proportion of CO2 emissions, the proportion of renewable energies, environmental management or compliance with environmental guidelines can be used as criteria for an assessment.

For a company in the service sector, the main criteria are social criteria such as human capital, product liability, collective agreements, compliance with anti-discrimination guidelines, freedom of association or employee turnover rates.

However, the quality of management and therefore (corporate) governance will always and everywhere be taken into account when assessing the sustainability of an organization.

Corporate management

Specifically, these include guidelines for the prevention of corruption, bribery and money laundering, independence of the Management Board, programmes for internal whistleblowers and the signing of and compliance with sustainability standards of internationally recognized institutions. For example, the United Nations Principles for Responsible Investment (UN PRI).

ESG is also an issue for the capital market

Investors are increasingly and clearly attaching importance to sustainably managed investments. The terms ethical-sustainable investments, sustainable, ecological and socially responsible investments are often used.

You can read more about the capital market and sustainably managed investments in our Family Office magazine, kevin-underwood.com.

If you would like to talk to me about the topic, please feel free to contact us and we will advise you individually with company-related ESG solutions. Because as you have probably already read, one of our passions is to increase the value of your company and your stakeholders in a sustainable and profitable way.

Photo Credit: Shutterstock

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Kevin Underwood
I have been coaching Ultra High Net Worth Individuals for over 10 years. I am an executive and UHNWI advisor, coach, life and lifestyle expert. I have been running the UHNWI and Family Office online magazine kevin-underwood.com since 2014. In 2020 I founded the Kevin Underwood Group Swiss AG in Switzerland. A holistic provider for UHNWI services and executive & corporate services.

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