ESG – Environmental, Social and Governance

What is ESG?

ESG stands for Environmental, Social, and Governance, a framework used to evaluate a company’s performance and impact beyond traditional financial metrics.

A 2004 report from the United Nations – titled Who Cares Wins – carried what is widely considered the first mainstream mention of ESG in the modern context.

Why is ESG important?

ESG factors help investors assess a company’s sustainability, ethical practices, and risk management, which can influence long-term success and societal impact.

How does ESG relate to the ocean?

ESG has significant implications for the ocean, as it encompasses practices and policies that directly and indirectly affect marine environments, ecosystems, and communities.

What does the environmental aspect of ESG cover?

It includes a company’s impact on the environment, such as carbon emissions, energy efficiency, waste management, water usage, and biodiversity protection.

The “Environmental” pillar of ESG is deeply intertwined with ocean health, focusing on reducing negative impacts and promoting sustainable practices:

Marine Conservation and Biodiversity
- Companies are assessed on their efforts to protect marine ecosystems, such as coral reefs, mangroves, and seagrasses, which are critical for biodiversity and carbon sequestration.
- Examples include initiatives to reduce bycatch in fisheries, prevent habitat destruction, and support marine protected areas (MPAs).
Pollution Reduction
- Addressing ocean pollution, such as plastic waste, oil spills, and chemical runoff, is a key ESG focus for industries like shipping, agriculture, and manufacturing.
- Companies are evaluated on their waste management practices, efforts to reduce microplastics, and compliance with regulations like MARPOL.
Climate Change Mitigation
- The ocean absorbs about 25% of global CO₂ emissions, leading to acidification and warming that threaten marine life.
- ESG initiatives often involve reducing emissions from shipping, fisheries, and coastal developments, as well as supporting renewable ocean energy like offshore wind and tidal power.
Sustainable Seafood
- Overfishing is a major ESG concern. Companies are encouraged to source seafood responsibly, comply with sustainable fishing certifications (e.g., MSC), and reduce illegal, unreported, and unregulated (IUU) fishing.

How does climate change relate to ESG?

Climate change is a critical environmental factor. Companies are evaluated on their carbon footprint, strategies for reducing emissions, and resilience to climate-related risks.

What does the social aspect of ESG focus on?

It examines how a company interacts with its employees, customers, and communities, covering issues like diversity, labour practices, human rights, and community engagement.

The “Social” component of ESG relates to the communities and industries that depend on the ocean:

Coastal and Indigenous Communities
- Many coastal and Indigenous communities rely on healthy oceans for their livelihoods, culture, and food security. ESG practices promote equitable access to resources, respect for traditional knowledge, and community engagement in marine conservation.
Labor Rights in Maritime Industries
- Issues like human rights abuses in fisheries, forced labor, and poor working conditions in shipping and aquaculture are critical ESG concerns. Companies are expected to ensure ethical labor practices and fair wages in their supply chains.
Ocean Literacy and Education
- ESG efforts often include supporting education initiatives about ocean sustainability, fostering community awareness, and engaging stakeholders in marine stewardship

What does the governance aspect of ESG entail?

Governance evaluates a company’s leadership, ethics, transparency, and decision-making processes, including board composition, executive pay, and anti-corruption measures.

The “Governance” pillar focuses on transparency, compliance, and accountability in ocean-related activities:

1. Corporate Governance in Ocean Industries
  - Industries such as shipping, fisheries, oil and gas, and aquaculture are evaluated for their adherence to international regulations and standards, such as the United Nations’ Sustainable Development Goal 14 (Life Below Water).
2. Anti-Corruption and Compliance
  - Governance includes ensuring compliance with marine laws, preventing corruption in maritime sectors, and reducing illegal practices like IUU fishing and marine pollution.
3. Investor and Stakeholder Engagement
  - Companies with strong governance disclose their ocean-related risks and initiatives, align with ESG reporting frameworks (e.g., TCFD for climate-related risks in marine industries), and actively engage investors and stakeholders in sustainable practices.

Examples of ESG in ocean contexts

Shipping Industry

Transitioning to low-carbon fuels, adopting cleaner technologies, and reducing ballast water discharge to prevent invasive species.

Aquaculture

Implementing sustainable practices to minimize nutrient pollution, habitat destruction, and reliance on wild fish stocks for feed.

Tourism

Encouraging eco-friendly tourism and minimizing damage to coral reefs and other sensitive habitats.

Blue Carbon Projects

Investing in the restoration of seagrasses, mangroves, and salt marshes for carbon sequestration and biodiversity.
Learn more about Blue Carbon Research.