Environmental, Social, and Governance (ESG) investing: evolution, significance, challenges, and impacts

Abstract

The world faces complex challenges, from climate change and resource depletion to social inequities and governance issues, affecting the environment, society, and the global economy. Recently, there has been significant growth in sustainable finance as more institutional investors and funds adopt environmental, social, and governance (ESG) investing. This trend is driven by a combination of factors, including a focus on long-term financial value and better alignment with ethical values. Investors today prioritize sustainability alongside profit, targeting companies that contribute to a better future. They recognize the long-term risks of social injustice, environmental degradation, and poor corporate governance. Additionally, younger generations influence investment patterns by emphasizing sustainability and social responsibility. Stakeholder and regulatory demands for business ethics also boost this momentum. This chapter provides an in-depth analysis of the evolution, significance, and impact of ESG investing on investors and organizations.