ESG under the microscope – S for Social

According to a recent survey, only about a fifth of Czechs know what the abbreviation ESG stands for. That is why we decided to bring you this ESG under the microscope series. After the first part E for Environmental, we will focus on the social aspects of responsible investing.

Meeting colleagues in modern offices

S for social

The middle letter in ESG stands for "social", which includes the company's affect not only on its own customers, but also on employees and suppliers.

Therefore, the assessment mainly takes into account customer evaluations and employee satisfaction. This is largely what influences investors as they try to minimize the risk that social factors pose to returns.

The assumption is that satisfied employees lead to greater efficiencies and performance, and thus higher profits. And it can be proven scientifically. There is a list of the 100 most popular American companies among employees, and these companies generate up to 3% higher performance than other comparable businesses.

LGBTQ flag in front of the building

This area also covers a number of other factors, however, such as support for LGBTQ+ rights and overall diversity across the entire company. The use of cheap labour, which if absent strengthens the company's evaluation, is also closely watched. Establishing protections against sexual abuse is also important.

Strike on the street

Social factors
are not elusive

The above factors may seem a bit complex and abstract compared to other categories within ESG, but in practice this may not be the case. The impact of labour disputes and ignoring social factors on business is obvious; for example, it can result in a worker strike.

The company also directly regulates societal impact by offering goods and services. Walmart, for example, became a more acceptable choice for socially conscious investors after announcing in September 2022 that it would limit the types of ammunition it sells. This reduced the risk of a bad image and, according to S&P Global Market Intelligence statistics, led to higher sales. Social factors are thus intrinsically linked to how consumers judge a company's behaviour.

Oriental-style work meeting

Rewards for taking
a responsible approach

Zohlednění sociálních zájmů při investování, zejména
jako součást komplexní investiční strategie ESG,
investice chrání. Trh tak bude mít tendenci odměňovat 
ty společnosti, které minimalizují své vystavení sociálním problémům od prodeje kontroverzních produktů
po absenci inkluzivní strategie.

In the field of ESG, we work closely with our colleagues from ČEZ ESCO. Therefore do not hesitate to contact us with any questions. We will provide you with complete consultancy.

Authors of the photos: Aeternus Pictures, Petr Andrlík, Unsplash

Published: 18 October 2022 

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