The governance 'G' pillar in ESG is about assessing how well a company is run and ensuring that it acts in the best interest of its stakeholders.
Unethical practices like clientelism, conflicts of interest or improper business practices can have a devastating impact on a company and its shareholders.
Good governance has a strong positive impact
Factors such as transparency of corporate disclosures, respect for all stakeholders and fair executive compensation translate to a lower cost of capital, lower volatility and overall competitive advantage for a company.
Investing in sustainably run companies with strong governance practices means no nasty surprises, which bodes well for you as an investor.
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