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Companies are beginning to understand the “E” and the “S” of ESG

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Companies are beginning to understand the “E” and the “S” of ESG

The Caribbean is famous for its happy-go-lucky vibe.  No wonder, where nature is generally forgiving and the earth and the sea are bountiful. But the effect of global climate change on tropical islands is making the people of the Caribbean more circumspect and this is reflected in investors’ focus on  the environmental and social criteria of ESG.

Environmental criteria, the “E” in ESG, look at a company’s energy use, waste, pollution, natural resource conservation and animal treatment. They also evaluate which environmental risks might affect a company’s income and how the company is managing those risks. For example, a company might face environmental risks related to its ownership of contaminated land, its disposal of hazardous waste, its management of toxic emissions or its compliance with the government’s environmental regulations.

Social criteria, the “S” in ESG, look at the company’s business relationships. Does it work with suppliers that hold the same values that the company claims to hold? Does the company donate a percentage of its profits to the community or perform volunteer work? Do the company’s working conditions show a high regard for its employees’ health and safety? Are stakeholders’ interests considered?

Trinidad and Tobago has decades of experience in the oil and natural gas industries and is acutely aware of the environmental threat posed by the mismanagement of these industries. The country is also among the most cosmopolitan societies of this region, with large numbers of inhabitants of either Indian or African ancestry and noticeable traces of European and Chinese and—with unrest in neighbouring Venezuela—South American origin.  In such a mishmash of environmental and demographic factors, the prudent Caribbean investor must pay careful attention to the “E” and the “S” of the ESG criteria.