Environmental factors measure a company’s impact on the planet, for example, through carbon emissions. Other environmental factors include pollution, energy efficiency, and sustainability initiatives like reducing plastic packaging.
Social factors refer to a company’s relationships with its employees, customers, suppliers, and local communities. ESG investors try to assess how well the company treats its workers and customers.
Governance factors measure corporate standards and shareholder rights. Unlike environmental and social metrics, governance has been on top of investors’ minds for a long time. Shareholders already vote on Board appointments and executive compensation each year.