ESG Investments and their Impact on Corporations

ESG stands for Environmental, Social and Governance and it represents a set of criteria used to evaluate companies’ impact on the environment, local communities and their governance practices. This article aims to clarify how ESG is becoming increasingly important for businesses of all sizes and industries, especially because it plays a crucial role in achieving equitable, ethical long-term value creation and positive reputation.

After a brief introduction to the ESG layout, the text firstly discusses the 2023 global and region-wise trend in ESG activities and its main focuses. Generally, it is highlighted how there is a trend in the Information &Technology sectors, both in the US and in Asia, to invest in sustainable practices; on the other hand, in Europe, Corporate Social Responsibility initiatives are more present in the Healthcare and Financial Industry. This section also includes the two main aspects impacted by ESG in 2023, hence value chain management and AI, along with the main updates in regulations.

The article proceeds with the future outlook of ESG investments, which will be mainly impacted by the use of technology, such as Ai and big data analytics, and by stakeholders’ requests, like transparency. Other positive future trends are reported: ESG assets are expected to exceed $53 trillion by 2025 and the Green Bond market is expected to surpass $560 billion.

Finally, to asses in a complete manner the interaction between corporate world and ESG, the article will provide an analysis of Corporate Social Responsibility of Microsoft and Aramco. This analysis will lead to the conclusion that, at least for now, ESG does not determine a clear and positive impact on profitability and returns of corporations, thus remaining still majorly tackled by governments and big institutions.