Do you know what ESG means? Do you know how these factors impact investments? See how this acronym is dictating investments.
With climate change, it is possible to perceive a change in the vision and concern of the whole society. Thus, in search of a more balanced market model, ESG appears bringing relevant factors that must be analyzed in investments.
The acronym ESG refers to Environmental, Social and Governance and means that that company or investment seeks the best environmental, social and governance practices. That is, this acronym can be represented to say how much a business tries to minimize its environmental impacts, building a more just and responsible world.
It is an attempt to quantify the risks and actions of a company, which can become profit or loss within the organization. That is why, in recent years, this topic has become so debated.
How does ESG impact investments?
The acronym of ESG is related to the environment, social and governance of a business. Thus, these three pillars are analyzed, mainly in the financial market, to define whether a business is sustainable or not.
In the case of the environment, the reduction in the exploitation of raw materials, protection policies and investments in nature are evaluated; on the social side, job security and dignified remuneration are assessed and governance analyzes the transparency of information, management, diversity and representativeness of the board of directors.
Thus, ESG increasingly impacts investments, as consumer behavior and engagement are changing. In addition, government regulation increasingly forces this issue to be on the companies’ agenda. Therefore, ESG has a direct impact on the quality of investments and the ideal is that all three levels are high, as it indicates that the project is not only aimed at profit, but also at other fundamental values.
How does the energy market relate to these factors?
In 2020, ESG bonds raised $ 490 billion. In other words, the market is expanding and is showing no signs of retraction. In the case of the energy market, it is important that companies commit to global warming and look for ways to mitigate pollution. In this sense, there are already many oil companies in the regulated market, which offset carbon credit. But it is important that these actions are extended to other sectors to guarantee the existence of the planet.
With the pandemic in 2020, a new scenario was established and the need for adaptation, especially in the energy market, proved how clean sources are the bet of the future. Even with the fossil market falling, renewable sources continued to expand, being considered one of the best investments in this period.
In a unique context, the whole world has the opportunity to bet on companies that value ESG and encourage a more sustainable economic recovery. Following these criteria, solar energy gains relevance in the economic, social and sustainability pillars, as it is a renewable, competitive, silent source that does not emit pollutants during its operation.
In Brazil, public policies are necessary to foster the transition to a low carbon economy. In addition, the private sector needs to keep up with these changes, aware that these criteria are not specific and must be part of a constant evolution.
In other words, a company’s image and reputation, business transparency and the inclusion of sustainable practices are no longer merely subjective factors and become measurable aspects that influence the attractiveness of a company when receiving investments.
