Governments and regulatory bodies around the globe are implementing stricter regulations regarding environmental protection, social equity, and corporate governance. These regulations reflect a growing recognition of the impact that businesses have on society and the environment. Companies that proactively adopt ESG frameworks are better positioned to comply with these regulations, avoiding potential penalties and legal challenges. Moreover, adherence to ESG standards facilitates smoother operations and enhances stakeholder relationships, ultimately leading to improved business performance and sustainability.

There is a growing body of research indicating that companies with strong ESG performance tend to deliver better financial returns over the long term. Investors are increasingly seeking to allocate capital to firms that prioritize sustainability and ethical practices. This trend is exemplified by the rise of ESG-focused investment funds and the increasing popularity of green bonds. Companies that embrace ESG principles not only attract more investment but also reduce their cost of capital, as they are perceived as lower-risk opportunities by investors, thus driving financial performance.