Certified Environmental Social and Governance Analyst (CESGA) EFFAS Practice Test 2025 - Free CESGA Practice Questions and Study Guide

In the context of finance, ESG stands for Environmental, Social, and Governance. This framework is used by investors and institutions to assess the sustainability and societal impact of their investments. The emphasis on these three pillars highlights how companies manage risks and opportunities related to environmental issues, social responsibility, and corporate governance.

Environmental factors consider a company's impact on the planet, including issues like climate change, resource depletion, and waste management. Social factors evaluate how a company treats its employees, suppliers, customers, and communities. Governance pertains to how a company is managed, including its leadership structure, executive compensation, audits, and shareholder rights.

This understanding allows investors to make informed decisions that align not only with financial returns but also with ethical and sustainable practices, thereby addressing the growing demand for responsible investment. Other options such as Economic or Sustainable do not accurately capture the comprehensive nature of ESG, which is fundamentally centered around these three core areas.