ESG stands for Environmental, Social, and Governance — three pillars used to evaluate how responsibly a company operates. Environmental: carbon emissions, waste, resource use. Social: labor practices, diversity, community impact. Governance: board structure, executive pay, transparency.
ESG-focused funds have grown to over $30 trillion in assets under management globally. Major investors like BlackRock, Vanguard, and pension funds now integrate ESG criteria into their investment decisions. Companies with high ESG scores often enjoy lower cost of capital and better long-term stock performance.
Critics call it "greenwashing" — companies marketing themselves as sustainable without real change. Tesla was removed from the S&P 500 ESG Index in 2022 while ExxonMobil remained — highlighting the controversy around ESG scoring methodologies. Despite debates, ESG disclosure is becoming mandatory in the EU and increasingly expected worldwide.