What Is ESG?

It stands for environmental, social, and corporate governance (ESG), which is an evaluation of a firm’s collective conscientiousness for social and environmental factors.

Why ESG?

A Growing Demand for Socially Conscious Businesses

Capital flowing into ESG-related investment strategies saw unprecedented growth in 2020. Nearly $400 billion in cumulative ESG-focused private capital was raised from 2015 to 2020, with over a quarter being raised in 2020 alone.

As a precent of the VC market, ESG funds have been steadily rising in prevalence, attracting an increasing share of capital allocated.

5

In 2015 only 5% of venture capital flows were allocated to firms with an ESG thesis.

12

In 2019 that number rose to 12%, with 2020 tracking to a similar level.

Impact Investing is the Future

With climate and social justice concerns growing, more investors
are flocking to ESG and impact investing as a source of social and financial returns.

88%

of investors believe companies that prioritize ESG represent better opportunities for long-term returns. (1)

31%

of millennial investors either usually or always consider ESG factors in their investing. (2)

20%+

A basket of 94 U.S ESG exchange-traded funds ended 2020 up 20%+, beating the S&P 500’s gain of 16%. (3)

$51.5B

flows into sustainable investment funds in the U.S. in 2020, 2X 2019 levels and 10X increase from flows into ESG funds in 2018. (4)

85%

of CFA members in 2020 took ESG into consideration and 65% of their clients demanded that they do so. (5)

1. Edelman Trust Barometer: Institutional Investors, 12/2019, 2. Diversity Fund, 5/21/2021, 3. Morningstar, 2/25/2021, 4. Blackrock CEO Letter, 11/2020, 5. CFA Institute, 5/7/2021

Measuring ESG

An ESG score is compiled from data collected around specific metrics related to intangible assets within the enterprise. It could be considered a form of corporate social credit score. Research shows that such intangible assets comprise an increasing percentage of future enterprise value.

While there are many ways to think of intangible asset metrics, these three central factors together, ESG, comprise a label that has been adopted throughout the United States financial industry. They are used for a myriad of specific purposes with the ultimate objective of measuring elements related to sustainability and societal impact of a business.

There are many organizations with ESG assessments, ratings, and certifications, but there are no universal standards at this time.  Certification is very comprehensive and can take approximately a year to complete.  The real value of the ESG rating is not the absolute number, but the trends reflecting organizational improvement over time.

JUSTLY has chosen to be certified by B Corporation, to ensure that it abides by the ESG principles that it expects its fundraisers to embody.  Certified B Corporations are leaders in the global movement for an inclusive, equitable, and regenerative economy. B Lab certifications for businesses are unusual in their ability to measure a company’s entire social and environmental impact.

Invest Your Principal with Principle

Learn More