Certified Environmental Social and Governance Analyst (CESGA) EFFAS Practice Test

Diversity and inclusion can be classified as a social factor under ESG criteria because it represents a company's commitment to creating an equitable workplace and fostering an inclusive culture. This encompasses practices that aim to provide equal opportunities for all employees, regardless of their backgrounds, and promote a diverse workforce.

The social dimension of ESG focuses on the impact of a company on its stakeholders, including employees, customers, and the community. By emphasizing diversity and inclusion, a company not only enhances employee satisfaction and retention but also improves its reputation and market competitiveness. This commitment can lead to more innovative solutions and better understanding of diverse customer needs, ultimately benefiting the organization’s long-term sustainability.

The other options do not capture the essence of diversity and inclusion as effectively. While these factors could have operational implications or be considered in a risk assessment, they primarily fall under the social aspect of ESG frameworks that seek to measure social impact and responsibilities.