In Times of Change, Insight Comes First

Environmental, Social, and Governance (ESG) refers to a set of non-financial factors that are increasingly used by investors to identify material risks and growth opportunities. ESG analysis has become an essential part of investment decision-making, providing a more holistic view of a company’s long-term value and resilience.

The term "ESG" first appeared in the landmark 2004 UN report Who Cares Wins, initiated by leading global financial institutions under the guidance of the United Nations. This report laid the foundation for what would become the UN Principles for Responsible Investment (UN PRI), a framework that encourages investors to integrate ESG factors into their strategies and ownership practices.

The six key principles of the UN PRI are:

1.     Incorporating ESG issues into investment analysis and decision-making.

2.     Being active owners and including ESG issues in ownership policies.

3.     Seeking ESG disclosure from investee entities.

4.     Promoting acceptance and implementation of the principles within the investment industry.

5.     Collaborating to enhance effectiveness.

6.     Reporting on activities and progress related to ESG.

Since then, ESG has evolved from a niche concept to a mainstream investment paradigm, driven by global investor demand, regulatory developments, and a broader focus on sustainable economic growth.

Environmental: Climate change, carbon emissions, resource usage, energy efficiency, pollution control, and biodiversity preservation.

Social: Labor practices, employee well-being, diversity and inclusion, community engagement, product responsibility, and supply chain ethics.

Governance: Board structure and diversity, executive compensation, shareholder rights, internal controls, audit practices, anti-corruption, and compliance.

Based on global standards and principles such as the UN PRI, 26 common ESG topics have been identified and are widely referenced by institutional investors and regulatory bodies.

According to ohESG, ESG adoption has grown rapidly. By the end of 2021, nearly 4,000 financial institutions across more than 60 countries had signed the UN PRI, representing over USD 120 trillion in assets under management (AUM). Notable signatories include BlackRock, Allianz, Man Group, and CalPERS.

ESG integration is now embedded in the research and investment processes of many asset managers and pension funds. In parallel, an increasing number of exchanges and regulatory authorities are requiring—or strongly encouraging—ESG disclosures from listed companies.

Why ESG Is a Strategic Priority for Businesses

Embracing ESG is no longer just a reputational play—it’s a business imperative. Companies that proactively align with ESG principles are better positioned to attract capital, mitigate long-term risks, and create sustainable value for stakeholders.

For investors, ESG has become a lens through which financial and non-financial performance are integrated. The most widely adopted ESG investment strategies include:

1.     Positive screening (selecting high-performing ESG companies)

2.     Negative screening (excluding harmful sectors or companies)

3.     ESG integration (embedding ESG into financial analysis)

4.     Active ownership and engagement

5.     Impact investing

6.     Norms-based screening

7.     Thematic investing (e.g. clean energy, diversity, sustainable agriculture)

As ESG continues to reshape the global investment landscape, organizations that fail to adapt may risk losing investor confidence and competitive edge. Integrating ESG into core strategy, operations, and risk management frameworks is no longer a future ambition—it is a present-day necessity.

Disclaimer: Certain images or references used in this article are sourced from publicly available materials. We respect intellectual property rights, and any rightful owner may contact us for content removal.（jielang.liu@aegismanage.com）