Definition of ESG variables
| ESG performance, ESG pillars and ESG dimensions (source: Refinitiv) | ||
|---|---|---|
| Variable | Description measure | ESG predictor |
| ESG performance (ESG_perf) | Weighted average of the ESG scores and ESG controversies (captured from global media sources) | It is a combined indicator of ESG pillars [i.e. the environmental pillar (ENV), the social pillar (SOC), the governance pillar (GOV)], discounted for ESG controversies |
| ESG pillar | Description measure | ESG dimensions |
| Environmental (ENV) | Environmental performance measures a company’s capacity to reduce environmental emissions, to efficiently use natural resources in the production processes and to support the research and development of eco-efficient products and services | It is based on three dimensions: ENV_Ru (resource use efficiency), ENV_Em (emission and waste reduction), ENV_In (environmental innovation) |
| ENV_Ru = efficiency in reducing the use of materials, energy or water and capacity to find more eco-efficient solutions for the business processes | ||
| ENV_Em = commitment and effectiveness in reducing environmental emissions and waste in operational activities | ||
| ENV_In = capacity to reduce the environmental burdens and costs for its clients and to create new opportunities for eco-designed products and services | ||
| Social (SOC) | Social performance measures a company’s capacity to generate trust and loyalty in its workforce, to respect the fundamental conventions of human rights, to be a good citizen, to protect public health, to respect business ethics and to create value-added products and services | It is based on four dimensions: SOC_Wf (workforce), SOC_Hr (human rights), SOC_com (community), SOC_prd (product responsibility) |
| SOC_Wf = effectiveness toward job satisfaction, safe and healthy workplace, while developing both equal and diversity opportunity | ||
| SOC_Hr = effectiveness in respecting fundamental human rights conventions | ||
| SOC_com = commitment to being a good citizen, respecting business ethics and protecting public health | ||
| SOC_prd = capacity to offer high quality products and services, regarding the customers’ health and safety, data privacy and integrity | ||
| Governance (GOV) | Corporate governance performance measures a company’s capacity to act in the best interest of its shareholders through management systems and processes (structure and functions of the board of directors, compensation policy, etc.) | It combines three dimensions: GOV_Mo (management and oversight), GOV_shr (shareholders rights), GOV_csr (CSR strategy) |
| GOV_Mo = commitment and effectiveness in following corporate governance principles | ||
| GOV_shr = effectiveness in treating its shareholders in an equal manner | ||
| GOV_csr = way to incorporate social and environmental dimensions in its decision-making processes | ||
| Variable | Description measure | |
|---|---|---|
| Weighted average of the | It is a combined indicator of | |
| Environmental ( | Environmental performance measures a company’s capacity to reduce environmental emissions, to efficiently use natural resources in the production processes and to support the research and development of eco-efficient products and services | It is based on three dimensions: ENV_Ru (resource use efficiency), ENV_Em (emission and waste reduction), ENV_In (environmental innovation) |
| ENV_Ru = efficiency in reducing the use of materials, energy or water and capacity to find more eco-efficient solutions for the business processes | ||
| ENV_Em = commitment and effectiveness in reducing environmental emissions and waste in operational activities | ||
| ENV_In = capacity to reduce the environmental burdens and costs for its clients and to create new opportunities for eco-designed products and services | ||
| Social ( | Social performance measures a company’s capacity to generate trust and loyalty in its workforce, to respect the fundamental conventions of human rights, to be a good citizen, to protect public health, to respect business ethics and to create value-added products and services | It is based on four dimensions: SOC_Wf (workforce), SOC_Hr (human rights), SOC_com (community), SOC_prd (product responsibility) |
| SOC_Wf = effectiveness toward job satisfaction, safe and healthy workplace, while developing both equal and diversity opportunity | ||
| SOC_Hr = effectiveness in respecting fundamental human rights conventions | ||
| SOC_com = commitment to being a good citizen, respecting business ethics and protecting public health | ||
| SOC_prd = capacity to offer high quality products and services, regarding the customers’ health and safety, data privacy and integrity | ||
| Governance ( | Corporate governance performance measures a company’s capacity to act in the best interest of its shareholders through management systems and processes (structure and functions of the board of directors, compensation policy, etc.) | It combines three dimensions: GOV_Mo (management and oversight), GOV_shr (shareholders rights), GOV_csr ( |
| GOV_Mo = commitment and effectiveness in following corporate governance principles | ||
| GOV_shr = effectiveness in treating its shareholders in an equal manner | ||
| GOV_csr = way to incorporate social and environmental dimensions in its decision-making processes | ||
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