For a long time, various initiatives have emerged at the international level to land this concept on more specific objectives so that companies can measure how sustainable their operation is and what they can do to improve. Thus were born in 2004 the Environmental, Social and Governance criteria (ASG or ESG for its acronym in English), in order that investors and companies can evaluate and manage non-financial risks. This, in turn, has helped some investors direct their resources towards the most responsible companies.
The concept is complex because within a company all these elements are related and influence the generation of value. For example, to the extent that they offer quality working conditions and create inclusive environments, they can become more attractive to fill vacancies and to trigger innovation that is reflected in the products they offer. Or when they implement more sustainable processes, it is expected to reduce costs by saving water or energy.
Despite these benefits, ESG criteria have come under scrutiny in recent years as documented by the British magazine The Economist last year. In part, this is because their objectives are diverse and not all metrics used to measure progress are comparable, which has raised questions about the scope of ESG investments.
This is the beginning of a long debate that still does not have a definitive answer, because more and more voices are raised in its defense. In April of this year, representatives of the insurance industry in the United States They argued that ESG criteria are necessary for their business since it allows them to know how exposed their clients are to climate risks, which serves to adapt their coverages. It is convenient to have the issue on the radar, because we could see more cases of this nature.
Beyond what is observed at the aggregate level, in my opinion ESGs open up an opportunity to transform fund companies and more and more of them have incentives to follow these criteria. Some will do so for social responsibility, others to obtain financing, others to attract young talent, others to join the supply chain of companies with more advanced sustainability agendas, and others for prestige or brand positioning. For whatever reason, there is increasing interest and this can trigger changes to form companies that are more upright, more sustainable and committed to the people and communities with which they interact.