Several decades ago, the concept of sustainable investment began to gain popularity; that which, for various reasons, was considered ethical, sustainable, and/or pursued a global benefit for all parties involved, not just economic. The parameters used to consider an investment as sustainable are what is known as ESG criteria.

Its origin dates back to the Vietnam War when student protests against the conflict began to pressure their own universities to stop investing in arms companies. Its popularity grew with the boycotts suffered by some large companies operating in apartheid South Africa, causing many organizations to begin changing their strategies. To this day, issues such as climate change, diversity, or consumer protection have only served to increase the importance of ESG criteria both when investing and when doing business.

What are ESG criteria?

The criteria that make an investment considered responsible are three, as indicated by their initials in English:

Environmental factor – environmental impact, biodiversity, waste management…

Social factor – impact on the community, diversity, respect for human rights…

Governance factor (Corporate Governance) – impact on shareholders, transparency, responsible management…

Thus, for a company to be considered a sustainable investment, it must seek maximum profitability, but without forgetting the commitment to society reflected in ESG indicators.

Importance of ESG criteria

After more than half a century since the emergence of this investment concept, this way of seeking profitability is more in vogue than ever. And its popularity is not trivial, as companies that are considered sustainable and responsible offer greater expectations of growth, competitiveness, and future.

The first major boost to this type of investment came from Wall Street when, in the late 1990s, it created the first global index with sustainability criteria: the Dow Jones Sustainability Index. Following this milestone, the UN launched the Principles for Responsible Investment, a guide to integrating ESG criteria into investments, based on six points:

Incorporating ESG issues into the processes of analyzing potential investments and decision-making.

Including ESG issues in company policies, leading to responsible practices.

Transparent disclosure of the Principles for Responsible Investment.

Promoting the acceptance and implementation of the Principles for Responsible Investment.

Working to improve the effectiveness of the Principles for Responsible Investment as a whole.

Analyzing and reporting on activities related to ESG criteria and their progress.

This small guide, therefore, is a way to encourage responsible investments; thus rewarding companies that do things right. The long-term result aims to be a more efficient, financially sustainable, and socially responsible economic system that benefits the environment and society as a whole on a global scale.