Environmental factors include the contribution a company or government makes to climate change through greenhouse gas emissions, along with waste management and energy efficiency. Given renewed efforts to combat global warming, cutting emissions and decarbonizing is become more important.
Governance refers to a set of rules or principles defining rights, responsibilities and expectations between different stakeholders in the governance of corporations. A well-defined corporate governance system can be used to balance or align interests between stakeholders and can work as a tool to support a company’s long-term strategy.
Governance can also refer to the standard of government of nations. Robeco measures ESG levels using RobecoSAM’s proprietary Corporate Sustainability Assessment for companies, and Country Sustainability Ranking for governments, to give overall ESG scores. There is some crossover between the two, particularly for multinational companies.
Also read: ESG funds