ESG (Environmental, Social, and Governance) represents the corporate responsibility of business entities across environmental, social, and governance aspects. In recent years, the discourse surrounding corporate social responsibility has reached a peak. Various initiatives have called for a shift in the business sector’s guiding principles-from a sole focus on maximizing profits for companies and their shareholders, toward a broader perspective that considers the wider context in which companies operate and incorporates the interests of stakeholders into business decision-making.
This evolving approach presents companies, boards of directors, executives, investors, and regulators with significant challenges across four main dimensions: managerial-business, financial-investor returns, legal–fiduciary duties and board responsibility, and reporting–the nature and scope of disclosure requirements.
At the core of these challenges lies the question of how non-financial factors, such as corporate governance, social considerations, and climate risks-impact financial performance forecasts. Currently, no established financial model fully captures this relationship, highlighting the need to develop robust data and information frameworks that will enable the assessment of their financial implications in the future.