What is ESG?

ESG – Environmental, Social and Governance

ESG stands for Environmental, Social and Governance. This is often called sustainability. In a business context, sustainability is about the company’s business model, i.e. how its products and services contribute to sustainable development. 

It is also about a company’s risk management, i.e. how it manages its own operations to minimise negative impact. 

Below is an explanation of what ESG stands for. We explain how a financial entity works with ESG as part of its wealth management. This also gives a good understanding of  ESG and why it is an important factor in business decisions. 

Environmental

Global production and consumption have a major impact on our environment. When producing and consuming everything from cars to food, we contribute to climate change, resource depletion, waste, pollution, deforestation and bio-diversity to name a few examples. 

Below is an example of how a factory can make a business out of reuse and lifecycle management of computers, mobile phones and other IT products.

In 2018, our ESG analysts visited the Swedish IT company Inrego. The company is a market leader in  reuse and lifecycle management of computers, mobile phones and other IT products. And they help organisations across all of Europe to strengthen their sustainability work.

Social

Companies have a responsibility for their employees as well as their impact on the societies in which they operate – for instance in terms of working conditions, labour rights and diversity.

In 2013, we visited a gold mine outside Johannesburg, South Africa. Gold is used for components in the technology industry that we invest in. For us, it is important to get a first-hand look at how the industry operates and the conditions for the workers.

Governance

Governance can serve as a control mechanism in relation to bribery and corruption, tax, executive remuneration, shareholders’ voting possibilities and internal control. We believe active corporate governance is important for the development of companies and provides long-term benefits for shareholders, employees and society. 

One way of ensuring this is to focus on increasing transparency and openness in contacts between the company and shareholders on issues such as board composition and shareholder rights.

To see how we have voted at various Annual General Meetings, please visit our voting portal.