Key Term

What is Esg?

Definition

ESG stands for Environmental, Social, and Governance, which are three key criteria used to evaluate an organization's sustainability and ethical impact. Environmental factors consider a company's impact on nature and climate change, social factors examine how a company manages relationships with employees, suppliers, customers, and communities, while governance deals with leadership, executive pay, audits, internal controls, and shareholder rights.

Significance

ESG has become increasingly important in charitable giving as donors seek to align their philanthropic activities with their values and create sustainable impact. Many donors now use ESG criteria to evaluate potential nonprofit partners and investment opportunities for their charitable funds. This approach helps ensure that charitable dollars support organizations that not only achieve their mission but also maintain high standards of environmental stewardship, social responsibility, and organizational governance. The rise of ESG-focused giving has led to increased transparency in the nonprofit sector and the development of more sophisticated impact measurement tools.