|This article is part of a series in partnership with the Human Rights Foundation. Buscaglia will be a speaker at the Oslo Freedom Forum in June.
J.J. Gould: Let’s start by touching on the technical question here: What are ESG investments, exactly, and how do they work?
Marcos Buscaglia: The idea of socially responsible investment—the idea that ethical considerations, beyond financial returns to shareholders, should also govern investment decisions—has been a theme forever. In the West alone, there’ve been major campaigns in recent decades to promote divestment from Apartheid South Africa, for example, or tobacco companies.
ESG indexes are different in the sense that they represent a whole new layer of investment analysis. They say, yes, investors will want to consider all the customary factors—financials, products’ market fit, projected cash flows, and so on—but they can now also look systematically at other factors that help them align their investments with their values.
The framework for these indexes is called “ESG” for Environmental, Social, and Governance. Essentially, the framework evaluates the sustainability and broader ethical impact of an investment. Environmental factors include things like carbon emissions, resource usage, and waste management; social factors, things like a company’s relationships with its employees, customers, or communities—including labor practices, diversity and inclusion, and so on; governance focuses on things like leadership, transparency, and accountability in decision-making processes.
Gould: Thinking about Turkey’s big green bond, then, what’s the problem there—assuming it’s marked for legitimate green initiatives? Investment going to them is good, no?