ESG is a set of criteria used to assess the sustainability and ethical impact of investments and business activities.

 Key ESG areas:

1. Disclosure of sustainability information:

• Sources point to growing pressure for transparency in the area of ESG. EU legislation, such as the CSRD Directive (2022/2464), introduces an obligation for businesses to disclose detailed information about their sustainability impacts, risks and opportunities.
• This information must be disclosed in accordance with established standards, such as the European Sustainability Reporting Standards (ESRS).
• An important aspect of disclosure is also the assessment of “dual materiality”, which means that businesses must consider both their impact on the world and the world's impact on them.
• Sources highlight the need for accurate, reliable and comparable ESG information, so that investors and other stakeholders can make informed decisions.

2. Sustainability due diligence:

• The CSDDD Directive (2024/1760) introduces an obligation for businesses to implement due diligence processes in the areas of human rights and the environment.
• This means that businesses must identify, prevent, mitigate and remediate negative impacts within their own operations and value chains.
• ESG due diligence is becoming an integral part of responsible business and helps minimize risks and maximize positive impact.

3. Combating greenwashing:

• Greenwashing is the practice of businesses trying to present themselves as more environmentally friendly than they actually are.
• The EU is taking action to combat greenwashing through legislation and strengthening transparency.
• Regulatory authorities, such as ESMA (European Securities and Markets Authority), play a key role in monitoring and enforcing the rules.
• Consumers and investors need to be informed and critical of environmental claims to avoid greenwashing.

4. The role of financial institutions:

• Financial institutions play a key role in promoting ESG.
• The SFDR Regulation (2019/2088) obliges them to disclose information on how they take ESG risks and opportunities into account in their investment decisions.
• Investors are increasingly demanding that their investments align with their values and that financial institutions support sustainable development.

5. External assessment:

• EU legislation, such as the European Green Bond Regulation, introduces an obligation for external assessment of certain financial products in terms of their sustainability.
• External assessors must be registered and subject to ESMA supervision.
• The aim of external assessment is to ensure the credibility and reliability of ESG information.

Conclusion:

ESG is becoming an integral part of modern business and investing.

EU legislation and growing consumer and investor awareness are creating pressure for transparency, accountability and real progress in sustainability.

Businesses and financial institutions that actively engage in ESG can minimize risks, build trust, and contribute to a more sustainable future. Spring