Environmental metrics focus on a company’s impact on the natural world and its efforts to mitigate environmental risks. Key indicators in this category include:

Carbon Footprint: This metric measures the total greenhouse gas emissions produced directly and indirectly by a company. Investors look for companies that actively manage and reduce their carbon emissions, as this is critical in addressing climate change.

Energy Usage: Investors assess how efficiently a company uses energy in its operations. Metrics such as energy consumption per unit of output and the percentage of energy sourced from renewable resources are crucial. Companies that prioritize energy efficiency and renewable energy sources are often viewed more favorably.change.

Waste Management: This includes metrics related to waste generation, recycling rates, and efforts to minimize waste. Investors are increasingly interested in companies that implement circular economy practices, which reduce waste and promote sustainability.

Water Usage: Companies' water consumption and management practices are also important, especially in water-scarce regions. Metrics such as water withdrawal, usage efficiency, and efforts to reduce water waste are key indicators of responsible resource management.

Social metrics evaluate a company’s relationships with internal and external stakeholders, including employees, customers, and communities. Important social indicators include:

Employee Diversity and Inclusion: Investors look for metrics related to workforce diversity, including gender and ethnic representation at various levels of the organization. Companies that promote diversity and foster an inclusive culture are often seen as more innovative and resilient.

Labor Practices: This includes metrics related to employee rights, working conditions, and job satisfaction. Investors assess how companies manage labor relations, health and safety standards, and employee engagement initiatives.

Community Engagement: Companies that actively engage with their communities and contribute to social causes can demonstrate their commitment to social responsibility. Metrics may include community investment levels, volunteer hours, and partnerships with local organizations.

Customer Satisfaction: Metrics related to customer feedback, product safety, and data privacy are increasingly important. Investors want to understand how companies prioritize customer welfare and respond to social concerns.

Governance metrics focus on the structures and processes that guide a company’s decision-making and accountability. Key governance indicators include:

Board Diversity: Investors assess the composition of the board of directors, looking for diversity in gender, ethnicity, and experience. A diverse board is often associated with better decision-making and risk management.

Executive Compensation: This metric examines the alignment of executive pay with company performance and ESG goals. Investors are wary of excessive compensation packages that do not tie to long-term performance and sustainability.

Shareholder Rights: Governance also involves the rights and protections afforded to shareholders. Metrics may include voting rights, shareholder engagement practices, and responsiveness to shareholder proposals.

Transparency and Reporting: Investors value companies that provide clear, comprehensive, and timely disclosures regarding their ESG practices and performance. Effective reporting enhances accountability and builds trust with stakeholders.