ESG funds is comparatively a newer concept in India. These funds are known to be as though a benchmark for investors potential or existing ones to judge whether the said company deals in any kind of business or whether or not it takes measures to contribute to the betterment of the environment, how they treat their employees, what their relationship with their suppliers are and moreover, if they carry our business in the most legal manner. It is also necessary to understand that although ESG funds are a part of fund management, it is a specialized concept in itself.
Another reason that businesses, especially
the growing ones will need to inform themselves about the concepts of ESG funds
so that when the time comes, they aren’t caught totally off guard. This concept
of the ESG funds is also being applied to figure out the possibility of
material risks and any growth opportunities.
ESG, which stands for environmental, social
and governance funds is also alternatively known as socially responsible
investing or sustainable investing. In the environmental factors, the ones that
are covered usually deal with scrutinizing air emissions and air quality or
energy usage and conservation. Plus, there is also the land use and use of
natural resources, assessing waste management and quality of water, and also
gauging whether or not in making the product, there is usage of any hazardous
materials.
In the social factors, as said earlier, the
relationship with employees, suppliers, clients and communities are judged.
Here they see if the labour standards are met and followed, production quality
and safety is taken care of and there are equal employment opportunities
provided at the job.
In the governance bit, shareholder rights,
risk controls, and company leadership is assessed. While investing in any
business, the company judged if there are ethical business practices, proper
voting rights in place for the shareholders, and independence of board and
diversity in it.
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