Environmental, social and governance (ESG) issues are now at the forefront of corporate thinking, as a source of both risk and opportunity. Several factors are driving this change – including stakeholder activism, consumer choice, ESG-related litigation, and new legislation on ESG related issues, much of which has extra-territorial reach. Stakeholders, including shareholders, employees, contractors, consumers, communities and supply chains are effectively influencing corporate behaviour.
ESG criteria establish a framework used to assess the impact of the sustainability and ethical practices of a company on its financial performance and general operations. Increasingly, ESG data is used to analyze corporate risks and behaviour that can influence and even determine the long-term performance of companies. This type of risk analysis has become very important to investors in all sectors of the economy, but it is particularly germane in sectors where environmental and social issues have assumed greater significance and notoriety – such as in the extractive industries of petroleum and mining.
It is very important to appreciate that, while the acronym ESG is of relatively recent vintage, many of the concepts included in the criteria have been applied to the mining sector for decades.
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This piece was originally published on dentons.com as an article on Dentons’ Pick of Canadian Regulatory Trends to Watch in 2021 series. To read other articles in the Dentons’ Pick of Canadian Regulatory Trends to Watch in 2021 series, click here.