Recomentor Overview
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This help section provides background information on what the term ESG means as well as in which areas ESG risks can be found. It touches on the subject of double materiality and explains which types of users can benefit from Recomentor and which solution this platform provides.
This help section provides background information on what the term ESG means as well as in which areas ESG risks can be found. It touches on the subject of double materiality and explains which types of users can benefit from Recomentor and which solution this platform provides.
Background
ESG is an investing principle focused on Environmental, Social, and Governance factors. In 2004, the UN Secretary General and UN Global Compact initiated Who Cares Wins in collaboration with the Swiss government. This report was created to support sustainability in the context of capital flows and to enable a better way for capital market stakeholders to integrate ESG factors into their management processes. A summary of the WCW strategic outcomes can be found here.
Risks can be understood as the potential for harm or financial loss, or the chance that the actual outcome or investment's actual gain will be different from the expected outcome. ESG risks can be found in the following areas:
Compliance: Legal and financial penalties can be the consequence for non-compliance with ESG standards.
Investment: Investors favor companies who comply with ESG regulations and avoid those who do not.
Supply Chain: Penalties due to unethical practices can accumulate and cause suppliers to increase their prices to combat the deficit.
Reputation: Stakeholders, including customers, prefer companies which comply with ESG standards.
Recomentor as a Solution
Since 2004, a countless number of ESG-related frameworks have been created, and the need for ESG risk management has steadily increased. To get an overview of some of the most common ESG frameworks, see the ESG Glossary. Furthermore, ESG risk management is tied to the concept of double materiality. This term aims to convey the concept that ESG risk management works in a two-fold manner: Successfully navigating and minimizing ESG risks will not just benefit a company financially, but will also lead to increased sustainability and accountability in environmental, social, and global terms.