While governance matters have long received their due importance, environmental and social issues have received slower traction. ESG refers to a combined framework of ‘environmental, social and governance’ factors—which relate to phenomena such as scarcity of natural resources, climate change, global economic and demographic change, etc. While these considerations have traditionally been qualitative and intangible, there is a shift towards quantification.
Sustainable investing (also called responsible investing) refers to investment in companies which have sustainable business models i.e. which manage their financial, environmental, and human capital resources efficiently. ESG investing refers to investing in line with ESG considerations. Socially responsible investing refers to investing in companies which are not detrimental to a society, but which contribute towards positive societal change through their positive social and environmental profiles.