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Case Study: What is ESG? Why Is It Important?
ESG is like a report card for companies, but instead of just grades on how much money they make, it’s about how well they balance the environment, social responsibilities, and governance. Knowing how companies score on ESG can help you make smarter decisions if you're looking to invest in the stock market. By understanding their impact on the environment, how they treat people, and whether they run an honest business, you can choose to invest in companies that are not only making money but also making the world a better place!
- Environmental (E): How does a company impact the planet? Do they manage their waste and pollution? Are they careful about using resources like water and fuel?
- Social (S): How do companies treat people—employees, customers, and communities? Do they have safe working conditions, fair labour practices, and support the local community?
- Governance (G): This is about how the company is run. Do they have good leadership and business ethics? Are they transparent with shareholders?
Case Study: Maersk Shipping
The maritime industry is responsible for transporting 90% of the world’s trade. In particular, one of earths most crucial commodities, crude oil. This massive volume of trade depicts the critical role of the maritime industry in ensuring a constant supply of resources essential to todays societies, like energy, to meet global demand. That being said, environmental concerns to improve sustainability and incorporating ESG evaluations are rising within the shipping industry.
For example, let’s see how this works in action with a shipping company like Maersk using ESG ratings to decide if it’s a good investment.
Maersk’s final score? An AA rating, which means they’re a leader in managing ESG risks. That’s a good sign if you’re thinking about investing in them!