What is ESG?
A definitive list of environmental, social and governance (ESG) issues does not exist. It would not be possible or desirable to produce a list, or a set of definitions, that claimed to be exhaustive or definitive. Nonetheless, the table below provides examples of ESG issues, for guidance purposes based on the UN PRI Reporting Framework Main Definitions.
Environmental (E): Issues relating to the quality and functioning of the natural environment and natural systems. These include: biodiversity loss; greenhouse gas (GHG) emissions, climate change, renewable energy, energy efficiency, air, water or resource depletion or pollution, waste management, stratospheric ozone depletion, changes in land use, ocean acidification and changes to the nitrogen and phosphorus cycles.
Social (S): Issues relating to the rights, well-being and interests of people and communities. These include: human rights, labour standards in the supply chain, child, slave and bonded labour, workplace health and safety, freedom of association and freedom of expression, human capital management and employee relations; diversity; relations with local communities, activities in conflict zones, health and access to medicine, HIV/AIDS, consumer protection; and controversial weapons.
Governance (G): Issues relating to the governance of companies and other investee entities. In the listed equity context these include: board structure, size, diversity, skills and independence, executive pay, shareholder rights, stakeholder interaction, disclosure of information, business ethics, bribery and corruption, internal controls and risk management, and, in general, issues dealing with the relationship between a company’s management, its board, its shareholders and its other stakeholders. This category may also include matters of business strategy, encompassing both the implications of business strategy for environmental and social issues, and how the strategy is to be implemented.
Numerous organizations and projects have identified ESG issues by sector, together with associated key performance indicators.
Examples include:
- The European Federation of Financial Analysts Societies (EFFAS): KPIs for ESG - A Guideline for the Integration of ESG into Financial Analysis and Corporate Valuation
- The CFA Institute: Environmental, Social and Governance Factors at Listed Companies - A Manual forInvestors
- UNEP FI and WBCSD: Translating environmental, social and governance factors into business value
Reference: United Nation Principles of Responsible Investing, 2018. PRI Reporting Framework Main Definitions. https://www.unpri.org/Uploads/i/m/n/maindefinitionstoprireportingframework127272949397.pdf
Why ESG is becoming important
Governments and regulatory agencies around the world aresending very clear signals that human and social capital are critical focus areas for 2022.
While reporting will remain a key business function and way to be in dialogue with investors and stakeholders, leading organizations need a forward looking strategy accomplishes more and anticipates this increased scrutiny.
The way ESG disclosure and regulation are rolling out differs across global markets. WELL can help you formulate and execute a plan for your ESG strategy, so you can make a bigger impact on social issues and communicate that impact to stakeholders.
Understanding reporting frameworks
There are many ESG and sustainability frameworks that exist today; different frameworks serve different needs and areas of focus. Here are some common frameworks, with an explanation of how WELL fits in.
- GRESB (Global Real Estate Sustainability Benchmark) is the leading ESG benchmark for real estate and infrastructure investments across the world and empowers investors to make decisions leading to a more sustainable real estate industry. Together, WELL and GRESB demonstrate the importance of health and well-being for organizations seeking to benchmark, report and improve their ESG performance through real estate.
- GRI (Global Reporting Initiative) helps businesses and other organizations take responsibility for their impacts by providing them with a global, common language to communicate those impacts. IWBI serves on the GRI Task Force created to help map the GRI Standards and Disclosures to the 16 Practices in the Robert Wood Johnson Foundation’s Culture of Health for Business Framework. The purpose of this multi-year task force is to share best practices, aiming to activate the framework and to encourage and deepen companies’ reporting on health initiatives and metrics.
- The SDGs (Sustainable Development Goals) set broad social and environmental goals. Responsible investors and corporations are increasingly using the UN SDGs to help set benchmarks. WELL offers these organizations a balanced, integrated framework of strategies that supports the health of individuals within buildings and enables the wider community and surrounding environment to thrive.
- S&P CSA: The S&P Global Corporate Sustainability Assessment (CSA), established in 1999, is an annual evaluation of companies’ sustainability practices. It covers more than 10,000 companies from around the world. The CSA focuses on sustainability criteria that are both industry-specific and financially material. Based on IWBI’s internal review, features in WELL can impact the results of approximately a quarter of the S&P CSA banking sector questions, including approximately half in the social dimension.
- IRIS+: Impact measurement and management is a Core Characteristic of Impact Investing. The GIIN offers the IRIS+ system to support the practice of impact investing and promote transparency, credibility and accountability in the use of impact data for decision making.
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How WELL can help
The International WELL Building Institute (IWBI) is a public benefit corporation on a mission to transform health and well-being in buildings, organizations and communities around the world.
In 2014, IWBI launched the WELL Building Standard (WELL), the leading tool for advancing health and well-being in buildings, communities and organizations, globally.
WELL helps organizations manage their company health as rigorously as they do their P&L, providing pathways for leaders at all levels to create spaces that prioritize employee health and well-being and to embed people-first strategies into organizational culture.
By providing a method to measure and report on human and social capital metrics, WELL makes transparent and standardized disclosure easy.