Q. Consider the following statements with respect to environmental, social, and governance (ESG) framework::
1.ESG investment strategies guarantee higher financial returns compared to traditional investment approaches. 2.ESG criteria are used by investors, stakeholders, and organizations to evaluate a company’s commitment to sustainable and responsible business practices.
3.ESG investing only applies to public equity investments, not other asset classes such as private equity, fixed income or real estate…
Which of the statements given above is/are correct?
Explanation –
Statements 1 and 3 are incorrect. ESG (Environmental, Social, and Governance) investment strategies do not guarantee higher financial returns compared to traditional investment approaches. ESG investments are made with the primary goal of aligning one’s portfolio with ethical and sustainable values, and they take into account not only financial factors but also environmental, social, and governance considerations.
While some ESG investments may perform well financially, their returns are subject to the same market risks and fluctuations as traditional investments.
ESG investing is a framework for evaluating how companies manage their environmental, social, and governance risks and opportunities. This framework can be applied to any type of investment, regardless of the asset class.
Statement 2 is correct. ESG criteria are used by investors, stakeholders, and organizations to evaluate a company’s commitment to sustainable and responsible business practices.
Environmental, social, and governance (ESG) criteria are a set of standards that companies can use to measure and manage their impact on the environment, society, and their own governance practices. ESG criteria are becoming increasingly important to investors, stakeholders, and organizations because they can help to identify companies that are making a positive impact on the world.
Source: ForumIAS
