ESG Report: Analysis of Environmental, Social, and Governance Factors

This report provides an in-depth analysis of Environmental, Social, and Governance (ESG) factors and their impact on business and investment decisions. It defines ESG as a framework for evaluating a company's sustainability and societal impact, encompassing environmental concerns like resource depletion and pollution, social aspects such as employee rights and diversity, and governance issues including corruption and executive remuneration. The report examines how companies, like Nordea, integrate ESG into their financial management and decision-making processes, including the assessment of environmental and social impacts, and how investors use ESG data to inform their investment strategies. It highlights the growing importance of ESG in financial markets, the increasing interest from investors, and the various approaches they use to incorporate ESG considerations. The report also touches upon the role of social enterprises and the importance of social marketing while concluding that ESG is a crucial approach for companies committed to social responsibility and sustainable practices. Finally, the report provides a comprehensive overview of the topic, covering its definition, applications, and significance in contemporary business and finance.

Running head: ESG – ENVIRONMENTAL SOCIAL AND GOVERNANCE
ESG – ENVIRONMENTAL SOCIAL AND GOVERNANCE
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1ESG – ENVIRONMENTAL SOCIAL AND GOVERNANCE
The objective of this paper is to analyse the concept of ESG. Environmental, social and
governance or ESG is a concept that refers to these three main factors in determining the
sustainability as well as the societal impact of the investments in any business or company.
These three criteria facilitate in determining the financial performance of the companies in the
future. The paper discusses how the companies use the concept of ESG in benefitting their
financial aspects in the company. It is an extremely popular way in which the investors evaluate
the direction in which the company wants to invest.
The term ESG is an abbreviation for Environmental, Social and Governance. This is also
referred to as sustainability. When referring to business, sustainability determines how the
businesses contribute and help in sustainable development through its products and services. It
also gives details about the risk management of the company in order to manage the operations
and minimize the negative impacts (Van Duuren, Plantinga & Scholtens, 2016). ESG plays a
significant role in taking business decisions. It considers three aspects in business environment
that are environmental, social and governance. The environmental aspect looks into the impact of
global production and global consumption on the environment. Whenever there is any kind of
production and consumption, the climate gets affected in some or the other way. There is
depletion of resources, wastage, pollution, deforestation that harms the environment (Amel-
Zadeh & Serafeim, 2018). The businesses have a responsibility towards their employees as well
as towards the societies where they operate. The working conditions, employees’ rights and
responsibilities, diversity in the workplace should be taken care of by the employers in any
organisation. Governance serves as a control mechanism that looks into the aspects of corruption
and bribery in an organisation (Fatemi, Glaum & Kaiser, 2018). Other responsibilities include
executive remuneration, tax, the voting responsibilities of the shareholders and internal control.

2ESG – ENVIRONMENTAL SOCIAL AND GOVERNANCE
An active corporate governance is beneficial to the growth and progress of the companies
including providing long-term benefits to the shareholders, the employees and the society
(Valente & Atkinson, 2019).
ESG has various applications in an organisation. One of those is the financial
management of an organisation that works with ESG as a factor in the wealth management.
Nordea is a company based in the Nordic regions that is the largest financial services group and
the largest bank in Europe. It is committed to the concept of sustainable development with the
combination of financial, environmental, social as well as governance responsibilities. They have
built a strong in-house team of ESG analysts that supports their credit analysts as well as client
executives in order to integrate the aspects of ESG in financing (Sahut & Pasquini-Descomps,
2015). The companies carry out the ESG analysis in two ways. The first way is where it is
assessed how the companies handle their businesses in a responsible way in maintaining their
relationship with the stakeholders who are the employees, the suppliers, the customers, investors
and the environment as well as the society. Secondly, the companies are assessed on how they
position their products and services to maintain its sustainable responsibility in relation to the
climate change and the changing demographics. The Nordea team encourages the companies to
invest in green bonds. This is a process where the companies are asked to progress with low
carbon economy in mind and implement resilient models of business (Dahlberg & Wiklund,
2018).
500 companies have reported the ESG data that social and governance aspect in the
companies form less than 20% in the year 2011 and it has increased to 85% in the year 2017.
There has been a growing interest among the investors due to such impressive numbers and the
investors are using different ways to implement these. Firstly, they evaluate ESG negatively in

3ESG – ENVIRONMENTAL SOCIAL AND GOVERNANCE
order to avoid certain stocks and industries. Secondly, they find the best performers in each of
the industries through the best-in-class ESG. Thirdly, they integrate the ESG approach into the
analysis. There is a concept of ESG engagement that involves targeting the companies to create
the best ESG performance. The last two practices were found to be the best strategies however;
the first one was identified as the worst example. There are barriers for investors that include the
low comparability between the ESG measures. It is meant to serve the society too and not just
the shareholders. There has been an improvement in the environmental causes relating to food
and water, patient health, and an increased transparency in the usage of energy consumption that
has decreased over the years. The customers are willing to pay more for the products that are
committed to social and environmental causes. This has a positive relationship between the ESG
data and the customers’ behaviour. However, there have not been many improvements on all the
factors relating to the implementation of ESG (Serafeim & Grewal, 2016).
Social enterprise has an important role to play in entrepreneurial relationships. Four areas
were identified where a social enterprise could benefit in entrepreneurial marketing. These areas
were competing in market, its efforts to attract the financial structure, employing volunteers and
lastly, presenting the products and services to the target audience (Laermann, 2016). However,
ESG and social enterprise are not the same. Social enterprises are businesses that integrate the
social impact intentionally and as a non-negotiable component of business model. Therefore,
when a company recognizes itself as a social enterprise, it does not refer to them being a
responsible company; it refers to the fact that they are being forced to become responsible
companies. Social marketing has become important in today’s world. It is required in the social
progress of a company as it influences behaviour as well as social change. However, in order to
fully understand the responsibilities and the opportunities that the stakeholders offer in the

4ESG – ENVIRONMENTAL SOCIAL AND GOVERNANCE
future, social marketing programmes need to be concerned with the effects as well as the process
involved in social marketing (Verheyden, Eccles & Feiner, 2016). Social media marketing is
used in every aspect of the business in today’s world. It is seen that self-reporting by the
companies on social media leads to erroneous data to be published and classifies the world’s
biggest oil company to be the world’s greenest company on the planet. Therefore, it seems that
calculating the ESG scores of a company based on the social media advertisements is not a good
idea.
Thus, it can be concluded that ESG is an important way for the companies to engage in
investments where they are socially conscious and fulfill their responsibilities. The
environmental aspect considers the company’s responsibility towards nature. The social aspect
focuses on the relationships with the employees, the suppliers and the customers as well as the
society where it operates. Lastly, governance deals with the company’s leadership and internal as
well as external controls that determine the success of a company.

5ESG – ENVIRONMENTAL SOCIAL AND GOVERNANCE
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