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ESG channel factorsFirst of all, what is ESG?The acronym ESG refers to environmental, social, and governance criteria ( Environment, Social, and Governance ):these are the 3 main areas that represent the pillars of sustainable investment.As explained in the previous section, investors evaluate companies using ESG criteria to rate the quality ofthe investment and determine the associated risks.

In greater detail:Environmental factors refer to the company's behavior in environmental aspects such as resource depletion, climate change, waste, and pollution.Social factors are related to the company's treatment of people, workers, and local communities, including health and safety issues.Governance factors refer to corporate and governance policies, including fiscal strategy, corruption, structure, and remuneration.Why ESG is so important to your businessIn 2018, more than 170 new global regulatory measures were proposed (160% more than in 2017), 80% of which weredirected at institutional investors.In March 2019, the European Commission also affirmed once again the importance of sustainable investments bypublishing new rules on disclosure requirements related to sustainable investments and sustainability risks.It is clear that social responsibility is a hot topic in the investment community and regardless of legalrequirements, it is something that you must address within your organization.

Since many investors areincorporating ESG factors into the investment process, integrating sustainability elements into your strategycan definitely have an impact on your income.This requires a change in mindset: ESG should be seen as an investment, rather than a cost.

As Larry Fink ofBlackRock's states in his 2019 letter to CEOs, “earnings are not inconsistent with purpose; in fact, profit and purpose are inextricably linked.

"What's more, companies that have incorporated ESG into their strategy have seen several benefits, including increased market confidence and shareholder value.However, planting some forests here and there will not really make a difference.

If ESG initiatives are not a representative of the business and environmental impact of the company, these efforts can be lost on investors.

Etihad Airways, the national airline of the United Arab Emirates, has raised US$1.2 billion in the first sustainability-linked loan (SLL) tied to environmental, social and governance (ESG) targets in global aviation.The transaction is the largest sustainable financing in the airline’s history and follows two innovative aviation financing deals – a first-of-a-kind sustainability-linked transition sukuk in 2020 and a loan tied to the UN Sustainable Development Goals in 2019.

Summary Yesterday’s business leaders focused on beating quarterly profit targets.

Tomorrow’s successful business leaders will focus on sustainable profits.

Public anger at the lack of action on climate change, corruption, income inequality, tax avoidance, and other social ills makes it harder for CEOs to ignore sustainability.

The reluctance of many CEOs to fully engage with sustainability can be attributed to the age-old view that it will hurt profits.

However, according to GlobalData's research, companies that embrace all three elements of sustainability will outperform their peers.

CEOs that are too slow to improve their company’s approach to sustainability will see an exodus of customers and a drop in profits far sooner than they ever imagined.