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How Does ESG Address Environmental Concerns?

When investors consider where to put their money, they may examine environmental, social and governance (ESG) criteria, learn about a company’s core values and decide if they align with their own. Young people, in particular, search out this information to make decisions that align with their morals

Among the three criteria, environmental has been receiving the most attention in recent news. Concerns about the environment have taken on increasing urgency as nations recognize the danger that climate change poses. Businesses that address these environmental concerns tend to stand out to investors.

Environmental Concerns in ESG

Environmental concerns can encompass many factors. The three most prominent are climate change, pollution and natural resources. 

Climate Change

Climate change is one of the most significant issues facing us. The changes in weather patterns and rising temperatures pose long-term hazards. Businesses can reduce their contribution to climate change by embracing policies such as: 

  • Decreasing production of greenhouse gases
  • Financing research into environmental impact
  • Implementing energy solutions that rely on renewable energy
  • Reducing carbon emissions 
  • Eliminating or cutting back on fossil fuels

Pollution and Natural Resources

The waste and pollution companies put into the world can also have a negative environmental impact. By being more mindful of the natural resources they use, they can lessen the impact on the environment. This may include changing the way raw materials are sourced, investing in biodiversity and ecosystem protection, reducing deforestation and using land responsibly. 

Companies can also make concerted efforts to decrease their waste production, including better controls on: 

  • Toxic emissions
  • Water pollution
  • Packaging material
  • Electronic and solid waste

Impact on Organizations and Business

Environmental factors can have a tangible impact that is recognized by consumers and stakeholders. While governance and social criteria are more nebulous, stakeholders can view environmental policy results directly. This makes it easy to track progress, but it’s also easier to identify companies that don’t meet these standards. 

Investors care about how environmental factors impact a company’s competitive position in the marketplace. They want to know about any environmental policies or decisions that affect the bottom line. A company’s risk management is a crucial facet of this, therefore information about risk mitigation tactics should also be available to investors as well.

Companies can incur legal risks if they ignore their policies’ consequences on the environment. They should develop strategies to combat climate change, preserve natural resources and reduce waste generation. 

Who Provides ESG Risk Assessments?

TRC offers ESG risk assessment that can help companies gauge where they stand with potential investors. Our thorough and knowledgeable staff has experience assisting businesses to identifing and addressing their ESG risks related to pollution and climate change. You can feel develop confidence about environmental issues and ESG when you use our consulting services. Reach out to learn more and contact us today!

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