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ㅡ The straw has the flavor of paperbut I applaud you for being environmentally conscious.  ㅡ Starbucks is a global coffee brand that is particularly popular among coffee franchises.  Starbucks' unrivaled atmosphere and coffee taste may be the reason, but the company's long-running "eco-friendly" campaign has also played a role. In 2018, Starbucks launched the Greener Starbucks Korea campaign, and paper straws were introduced for the first time in franchise coffee shops.  Paper straws were criticized for having a "paper taste," but they succeeded in projecting an image of a "good brand" to the MZ generation (millennials and generation Z), who consider environmental issues even when drinking a cup of coffee. Starbucks also has introduced cup lids that allow iced drinks to be consumed without straws, as well as reusable cups to eliminate the use of disposable plastic cups entirely.  Starbucks' eco-friendly move aligns with the MZ generation's "value consumption" tendency to purchase eco-friendly products, even if the price is a little higher, cementing the company's unrivaled position as the world's No. 1 coffee brand. Companies are focusing on improving their image in order to win the hearts of the MZ generation, because "good companies" are well received by the MZ generation. And at the heart of the transformation is ESG (Environmental, Social, and Governance factors), a new global standard for sustainable management. ㅡ The circumstances surrounding ESG's birth. ㅡ From quality to price A new era is on its way   How well do you understand ESG? ESG is an indicator for judging a company's non-financial performance. ESG stands for Environmental, Social, and Governance.  ESG management has recently emerged as a hot keyword around the world, but it is difficult to summarize the concept in a single sentence because it encompasses a wide range of areas such as "social responsibility," "creating shared value," and "sustainable management." Many people will think of companies' efforts that reflect eco-friendly trends because most companies recognize the need to focus on the environment and practice ESG management. Let’s go over the history of the terminology.   In 2004, the term ESG was first used in a report titled "Who Cares Wins" co-authored by the UNGC (UN Global Compact) and more than 20 financial institutions.   According to this report, a company's ESG performance can generate mid-to long-term value. Thus, a new management direction was proposed in order for a company to succeed.   Source: ANEVIS Later that year, the United Nations issued the Principles for Responsible Investment (PRI). Since the term ESG is used in these investment principles, a new management guideline known as ESG has become widely used around the world. In a nutshell, the core of the principles is that when investing in a company, people will now use "value" as a standard rather than mere "performance."  Given that these principles were enacted around the time that discussions about climate change began to heat up, ESG can be described as the financial sector's urgent commitment to ensure the survival of the Earth.   These are the world's first socially responsible investment principles, developed in collaboration with a number of experts, including financial institutions affiliated with the United Nations Environmental Programme/Finance Initiative (UNEP/FI).  PRI consists of six principles and 35 specific practices.     | UN Principles of Responsible Investment  (PRI) ① We actively consider ESG issues in our investment decisions. ② We become active investors, incorporating ESG considerations into our investment philosophy and management principles. ③ We request that our investment targets disclose information on environmental, social, and governance (ESG) issues. ④ We strive for the PRI level and financial industry implementation. ⑤ We work together to improve the effectiveness of PRI implementation. ⑥ We provide detailed reports to the outside world on the activities and progress of the PRI implementation.   Link to UN PRI  https://www.unpri.org/pri/about-the-pri   In other words, the principles of socially responsible investment are financial institutions' pledge to "invest only in companies that improve society."   As of January 2021, 3,615 financial institutions from all over the world had signed on to the Principles of Responsible Investment (PRI).  Companies must implement ESG management to attract investment now that more and more financial institutions are willing to invest only in companies that practice EGS management.   | Equator Principles The Equator Principles (EPs) are a voluntary agreement between financial firms not to invest in bad companies.  The Equator Agreement's central tenet is not to invest in development projects that threaten the environment or violate human rights. Currently, 123 financial institutions in 37 countries have adopted the Equator Principles.     Link to the principle of the equator  https://equator-principles.com/   ㅡ Who is assessing ESG? ㅡ Well-regarded companies are those with a high ESG grade. Companies are eager to manage according to ESG principles in order to gain the favor of investors and consumers. Then, who will assign ESG grades and based on which criteria? There are currently more than 125 organizations worldwide that evaluate ESG. Morgan Stanley Capital International (MSCI), Sustainalytics, and Bloomberg are examples of global ESG evaluation agencies. These 125 or so evaluation agencies rate companies by analyzing their respective data and evaluation criteria. Morgan Stanley Capital International is the most representative evaluation firm.  Every year, MSCI assesses 35 key ESG issues for publicly traded companies around the world. There are seven levels of ESG ratings, ranging from AAA to CCC.  Microsoft and NVIDIA are among the companies that received MSCI AAA ratings in 2020. Check out your favorite company's ESG rating on MSCI! https://www.msci.com/our-solutions/esg-investing/esg-ratings/esg-ratings-corporate-search-tool Find out your company's ESG score on Standard & Poor's (S&P Global)! https://www.spglobal.com/esg/scores/results?cid=4071032 Different evaluation institutions may give companies different ESG grades. In the case of Tesla, it received an A grade from MSCI but was ranked in the bottom 10 percent by Just Capital.  This is due to MSCI giving a large boost to Tesla because of its eco-friendly energy policy (E), whereas Just Capital rated Tesla as not responding well to customer input or safety issues (S). In any case, these institutions' ESG ratings of companies have a significant impact on investors. Companies with lower ratings are expected to have a more difficult time attracting investment than in the past.      ㅡ All companies should strive for ESG! ㅡ       "Everyone, ESG!" If you don't strive for it, you won't attract investors." Spreading the emphasis on ESG across companies and society was the theme of Larry Fink's annual letter in early 2020 as CEO of BlackRock, the world's largest asset management firm, with more than $7 trillion in assets under management.  Every year, Founder Larry Fink sends letters to CEOs of investment firms, and the flow of money around the world will inevitably change as a result of the letters sent by the world's largest financial giant. He stated in January 2020, "We will be the first to look at climate change and sustainability in all future investment and acquisition decisions." He also stated, "I will not invest in coal developers or producers of fossil fuels."  This letter quickly sparked the global ESG management craze.  ㅡ ESG is already affecting Generation MZ consumers ㅡ ESG is already affecting consumers. ESG encompasses more than just investment and management. It's become a part of daily routine. ESG is now a daily focus for the MZ generation in Korea, born after 1980. Sensitive to the crisis of climate change, the MZ generation pursues eco-friendly consumption, and keywords such as upcycling, zero-waste (no plastic), eco-friendly delivery (precycling), and refurbishment (resupplies) accurately describe the MZ generation's consumption behavior. Generation MZ does not buy things simply because they are inexpensive and of high quality. This is because the social value is important to the MZ generation. As a result, even if they are a little more expensive, they buy products from companies that take responsibility for social issues and engage in positive action. The meaning-out generation is the English translation of another name for Generation MZ. Meaning out is a combination of "coming out," which refers to revealing one's identity, and "meaning," which refers to expressing one's values or beliefs through consumption. Fairness and transparency are important to Generation MZ. They do not ignore unreasonable or unethical situations but instead advocate on a variety of social issues such as fairness, equality, the environment, safety, gender discrimination, and animal abuse. The MZ Generation is an activist. People who share similar values and interests can easily exchange ideas or organize joint activities via online and offline meetings.  When it is disclosed that a good company is "rich," or that a company is not ethical or does not follow the law, they may launch a boycott via SNS (Simple Notification Service). Companies that are found to be engaging in illegal management activities or turning a blind eye to social problems may now face a boycott by the MZ generation. ㅡ [E] Patagonia, your very existence is ESG. ㅡ ‘Nice Company’,  ‘Eco-Friendly Company’,  ‘The Earth's Watchman.’ All of these titles refer to Patagonia, a US-based outdoor clothing company.  Patagonia discontinued production of steel traction devices, which used to account for a significant portion of sales, after discovering that the equipment made for rock climbing cracked and damaged the rock walls. Instead, it is a well-known anecdote that Patagonia created aluminum equipment that did not harm the environment and as a result, achieved greater success. Even before the climate-change crisis became apparent, Patagonia was already equipped with an eco-conscious mindset.  Patagonia donates 1 percent of its total sales to environmental organizations each year, referring to it as a "tax paid to the Earth." Patagonia has also advertised, "Please don't buy our clothes," claiming that farming to grow eco-friendly cotton and not consuming even eco-friendly products as much as possible is more environmentally friendly. Even in consumption, Patagonia's ESG management has captivated the MZ generation's pursuit of social meaning.  As a result, Patagonia earned the reputation of being a "good company that cares about the environment," and it now ranks second in the US outdoor clothing market. ㅡ [S] The star of the show is...multi-ethnic and gender equalityNeflix ㅡ Have you noticed how many "female protagonists of color" there are in Netflix videos? This is due to Netflix's extra effort to earn an "S" in ESG.  Netflix aims for gender equality in the main characters in movies and series as well as increasing the proportion of main characters of color. As a result, it has improved significantly on 19 of the 22 inclusion indicators of an S evaluation year after year. According to the 2019 Inequality in Popular Films report, Netflix has significantly more characters that are diverse in terms of gender, race, LGBTQ, and sexual orientation. Read more about the "Inequality in Popular Films" report: https://assets.uscannenberg.org/docs/aii-inequality-report-2019-09-03.pdf ㅡ [G] Equal board of directorsTransparent decision-making ㅡ In comparison to the concerns about the environment and society, the governance aspect of ESG is a somewhat unfamiliar concept.  Governance is defined as "any device that allows all stakeholders to make transparent decisions with responsibility within the constraints of given resources in order to achieve common goals."  In most cases, it refers to the board of directors and corporate leadership.   According to ESG experts, governance is the most important aspect of the elements: environment (E), society (S), and governance (G).  This is due to the fact that all corporate activities for the environment (E) and society (S) ultimately stem from management's decision-making.   Governance is ranked first among the four pillars of ESG by the World Economic Forum (WEF): governance, planet, people, and prosperity.  Every year, ESG evaluation agencies add a new G index, with evaluation indicators such as "female director ratio," "CEO wage calculation method," "lobby funds," "bribery prevention measures," and "risk management" increasing.   BlackRock stated in 2018 that it would not invest in companies with fewer than two female directors.  Goldman Sachs stated that beginning in the second half of 2020 it will not engage in Initial Public Offering (IPO) work for companies that do not have directors who meet diversity standards.     The gender balance of high-level officials also applies to senior executives, with many women breaking through the glass ceiling.  Citigroup, one of the top ten US banks, appointed its first female CEO. Rashida Jones of MSNBC is the cable news industry's first black woman to be appointed president.  Furthermore, the BLM (Black Lives Matter) movement is countering racial segregation and promoting diversity in the composition of Boards of Directors. ㅡ Leap for a better society ㅡ The primary reason for people's interest in the environment, society, and governance factors is that consumers' and investors' values regarding the role of corporations have shifted.  There is a growing expectation that companies that have caused major social problems should solve them through responsible management activities and take actions that have a positive impact on people’s lives, in addition to the prevailing values that focused only on corporate economic performance. ESG demonstrates that the era of so-called "good companies," in which companies that strive to protect the environment, fulfill their social responsibilities, and have transparent governance, has arrived.   Unlike in the past, when companies were concerned only with how much money they made, the emphasis now is on "how" they made money.   When we consider the environment (E), respond to various societal issues (S), and have a transparent governance structure (G), a more peaceful and sustainable society can develop.   Will you engage in ESG investment, management, and consumption in order to create a more peaceful world?