Chapter 3
Give Me an ‘E’! Defining the Environmental Sector in ESG
IN THIS CHAPTER
Understanding a company’s natural resource usage
Highlighting effects of company operations on the environment
Seeing how “green” a company is and its mitigation measures
Recognizing stewards of the physical environment
Investors are becoming increasingly aware of the financial impact of environmental issues on companies in their portfolios. These investors are paying greater attention to issues such as climate change, water usage, energy efficiency, pollution, resource scarcity, and environmental hazards so that they can increase awareness of relevant issues and influence disclosure. The negative impact for companies failing to manage environmental risks includes increasing costs (for example, the need to clean up oil spills), reputational damage due to pollution incidents, and litigation costs.
Integrating environmental factors into a company’s strategy can present opportunities — for example, using resources efficiently can decrease costs and offering innovative solutions can create a competitive ...
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