Mon, 27 June 2022
What Is Esg?
Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.
ESG stands for environmental, social, and governance, and represents the area of focus for socially responsible investors.
This is often referred to as sustainable investing.
ESG investing incorporates environmental, social, and governance factors as it relates to the mission of the business.
It’s a set of standards for company operations that come into play in hiring leadership, compensation, shareholder rights, and more.
Environmental centers around renewable energy, waste management, water pollution, and deforestation.
Social centers around fair pay, workplace inclusion, and prevention of sexual harassment.
Governance centers around executive compensation, financial transparency, and board diversity.
Many investors focus primarily on executive compensation.
Limited partners increasingly look for ESG-related investments and will not participate in those without it.
Impact investing is different from ESG investing.
Impact investing seeks to fund startups that provide a measurable impact on a social cause.
Startups applying ESG to their business look for how ESG drives decision-making across all operations including the impact of the product or service, the operations, and that of their employees.
ESG investors look for their investment to make a meaningful contribution to the cause.
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