Glossary term


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Definition 1

ESG means environmental, social and governance factors [of which the governance shall include issues of health and safety, safeguarding and gender] considered by companies, investors, public sector and other organisations in a wide range of decision-making processes and situations including:

(a) strategy;

(b) purpose financing;

(c) company reporting; and

(d) supply chain management.

Definition 2

Environmental, social and governance (ESG) means factors and standards forming a [published] policy, framework, strategy or objective of a party, including:

(a) Climate Change and the achievement of [a Net Zero Target/ emissions reduction target]

(b) resource depletion;

(c) waste;

(d) pollution;

(e) deforestation;

(f) human rights

(g) gender;

(h) modern slavery;

(i) safeguarding;

(j) child labour;

(k) local and indigenous communities;

(l) conflict;

(m) work conditions;

(n) health and safety;

(o) employee relations;

(p) bribery and corruption;

(q) remuneration;

(r) board diversity and structure;

(s) political lobbying and donations;

(t) transparency;

(u) shareholder rights; and

(v) tax strategies.

Definition 3

ESG means environmental, social and governance considerations where:

(a) environmental considerations may refer to Climate Change Mitigation and Climate Change Adaptation, as well as the environment more broadly, such as:

(i) the preservation of Biodiversity;

(ii) pollution prevention and control;

(iii) the transition to a circular economy;

(iv) the sustainable use and protection of water and marine resources;

(v) waste prevention and recycling; and

(vi) the protection of healthy ecosystems.

(b) Social considerations may refer to issues of:

(i) inequality;

(ii) inclusiveness;

(iii) labour relations;

(iv) investment in human capital and communities;,

(v) human rights issues; and

(vi) the governance of public and private institutions, including management structures, employee relations and executive remuneration.

Drafting notes and guidance

ESG stands for environmental, social and governance. It is sometimes also referred to as corporate social responsibility ( CSR ) or corporate responsibility ( CR ).

ESG factors are considered by companies, investors, public sector and other organisations in a wide range of decision-making processes and situations including financing, company reporting and supply chain management. These include the environment, climate change, diversity, human rights, labour chain, modern slavery, philanthropy, accountability, sustainability, community, transparency, and fair trade.

Option 1

This definition highlights health and safety, safeguarding and gender issues, which can often be overlooked. It presents a menu of options which can be tailored by lawyers to suit client needs.

Option 3

This definition is particularly relevant in a sustainable finance context (see EU Commission: What is sustainable finance? in references section).

It refers to the social factors in the EU Disclosure Regulation (( EU ) 2019/2088), which impose transparency and disclosure requirements on certain firms in the financial services sector.

This option also provides contract drafters with a definition that is linked to the environmental objectives in Article 9 of the EU Taxonomy Regulation (Regulation (EU) 2020/852), which establishes an EU wide classification system or framework to facilitate sustainable investment.

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