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The ESG -- or environmental, social and governance -- criteria helps access how a company performs as a steward of nature, how it manages its relationships with stakeholders and how transparent is it with regard to its disclosures and management practices while emphasising a high degree of moral and ethical leadership.
The world is increasingly depending on companies to make sustainable choices. Companies undertake measures to decouple growth from their environmental footprint and focus on eco-friendly operations, manufacturing facilities and activities, with the objective of minimising the impact of operations on and nurturing the biodiversity.
Usually, retail investors, distributors of financial products or financial advisers focus on returns. But now, society wants to associate with businesses that are more responsible towards sustainability. This is already visible in the global lending and investing practices. Companies, despite generating high profits, could lose prominence or importance in the investment horizon if they have low ESG scores and thereby risk losing capital flows.