What is Your Personal ESG Score and Why Should You Care?

In a world of increasing environmental and social awareness, investing with your values in mind has become more important than ever. One way to do this is by incorporating environmental, social, and governance (ESG) factors into your investment portfolio. But what are ESG factors? And how can you create a personal ESG score for yourself? Keep reading to find out, but you may be surprised to find that you already are. You’re just missing a few items. In order to answer this question, we must first establish what ESG is.

What is ESG?

For those who are already in-the-know, mainly investors and stock market funds, ESG stands for environmental, social, and governance factors. ESG factors take into account how a business impacts the environment and society as well as any company policies that govern its treatment of employees and corporate governance. In layman’s terms, it takes all relevant information about a corporation’s practices to assess the quality of their business model from an ethical standpoint.

Can I measure myself against the same criteria as a business? Do do use water, consume products, produce waste, use motor vehicles or exist?

What are the Environmental factors?

  • Environmental impact: the effect a company has on the environment around it, such as waste and carbon emissions.
  • Natural resources: how effectively companies use natural resources like water and electricity.
  • Climate change initiatives (if any): what initiatives companies take to limit their contributions to climate change.
A group of people overlooking a cityscape in the background representing the talent that ESG can attract to companies

What are the Social factors?

  • Human rights: how well companies treat their employees, local communities, and society at large.
  • Diversity: the representation of different races, genders, disabilities, etc. in hiring practices and leadership roles.
  • Workplace safety: whether or not companies prioritize the health and safety of their workers (such as providing proper training for dangerous jobs).
Many people in cubicles in an offie representing the diversity, equity and inclusion elements of Governance

What are the Governance factors?

  • Political contributions (if any): the extent to which companies contribute to political campaigns and whether or not they influence legislation.
  • Executive compensation: how much money key company leaders make and whether there is a feasible correlation between their pay and the success of the business.
  • Board diversity (if any): what percentage of board members are women or minorities.
  • Job creation: how many jobs a company creates, especially those which pay a living wage and provide benefits.

In layman’s terms, ESG factors take into account how well a company cares for their stakeholders, communities, investors, employees and partners as well as the environment around them. While some investors might argue that certain companies need to make sacrifices in order to achieve greater profits, ESG factors ensure that a business is held accountable for their practices and maintain a certain level of integrity. ESG is also known as sustainability practices.

What is the score?

An ESG “score” is set on a scale from 0-100, in comparison with a company’s industry peers. If you score a zero, then you have a bit of work to do. If you score 100 (as if), well that is another subject and you can find more about that by reading about the effects of Greenwashing.

What is a Personal ESG Score?

So then, I can hear the gears in your head grinding…what does this have to do with me, the average investor who just wants to save for retirement and send my kids (either real or imagined) to college? Great question! It’s really quite simple. To get started, you just need to answer a few questions:

Am I living sustainably? This is going to take a little soul searching, or a quick summation of your existence. Your pick. What you really need to do is just figure out where there might room for environmental, social and governance improvement. But we’ll get more into that later.

Can I measure myself against the same criteria as a business? Yes… with a few tweaks: just because you are not a business, that does not mean that the idea of measuring yourself against ESG standards cannot apply to your own life. After all do use water, consume products, produce waste, use motor vehicles or exist? If you answered “Yes” to any of those, then you are either a part of the problem (one of a group that is not situationally aware) or you are a part of the solution (one of a group who attempting to balance the scales). You can still plot and measure your actions just as well as any Fortune 100 company. Think of yourself as the head of the board of governors of a complex hierarchy of inter-functioning systems. The CEO of self!

We would suggest starting with one or two areas and then expanding from there.

So what exactly are ESG scores or scoring?

Think about everything you do in a day and how it impacts the planet…food, heat, hot water, transportation, etc. All of those activities will need to be measured and scored out of 100. And so will your personal behaviour and lifestyle choices. If you score low, don’t panic: just think about the areas where improvement could happen. You could start by focusing on one area or you might decide to focus on a few at a time. It’s entirely your decision based on your life circumstances. The point is to just to get started! You will pick up what you need as you go.

We already have one of these….called a credit score. Yup, this is true. But no one (except the select few with an eom score) has ever heard of it before…which means you can make up your own rules. For example, one of the most interesting things about your personal ESG score is that it can be used as a method of self-assessment only; meaning you could give yourself whatever score you like (completely subjective). But keep in mind, for it to be effective in creating a sustainable future for the next bunch of procreations, then you might want to do it with a BFF, partner or family member just to help you stay on track. A rising tide floats all boats!

What’s Next on ESG ratings and ESG risks?

So how do I begin? First thing is to figure out all the possible areas where you might score yourself. Just pick a few from this list:

  • Dietary choices (meat vs. vegan and how often, chocolate, etc.)
  • Energy usage
  • Transportation habits
  • Attitude and outlook
  • Environmental impact of your job or career choice
  • Sustainable clothing choices
  • Investing and investment
  • Purchase of ethical goods (or purchasing them second-hand)
  • Recycling habits
  • Carbon footprint
  • Personal contributions to betterment-random acts of kindness
  • Composting practices, grow your own

And a few more. Then you make a detailed list about how each area impacts the environment and/or society. (Do not get too deep into the weeds on this or you may be sucked down a rabbit hole.) What comes next is a bit more challenging: you need to track your scores over time. We would suggest starting with one or two areas and then expanding from there. For example, you may decide to do sustainable clothing choices and energy usage on the first go around.

Then, over time you can add more areas or try new things. For example, one month you might decide to ride your bike to work instead of taking public transportation (this will definitely impact your score positively), and the next month you might plan a carpool to Starbucks (this will definitely impact your score positively). The options are endless and you can pick and choose whatever areas impact your life the most.

Don’t forget: the idea of an ESG score is to figure out what’s working and what’s not so that you can take steps towards improving things. And, if you slack off, don’t worry. Every week you can give yourself a new score to keep your momentum going.

…one of the most important things in this whole equation: YOU!

In conclusion on what is your personal ESG score

Everyone is different, so if there are some areas of your life that aren’t relevant to you, then don’t include them at all. For example, if you live alone and have no issues with purchasing fair trade or sustainable clothing or food for one, then you can leave those areas out.

Also, don’t forget to consider one of the most important things in this whole equation: YOU! Don’t make it difficult for yourself. If your score is really low, don’t beat yourself up about it. And if you’re happy with your score, take a moment to celebrate! Every step is a step in the right direction and you can make it easy to follow at your own pace.

Risk ratings, credit ratings & lower risk investments

A Personal ESG score is great way to estimate how sustainable your lifestyle choices are and gives you something tangible that you can work on improving. And whether you’re an individual or part of a company, if we all take steps towards making our lives a little more sustainable, then the world will be a better place for it.

When it comes to an ESG score for individuals, it is about living a sustainable life. ESG scores for individuals may be scoffed at by some, but your individual ESG rating or ESG score meaning for individuals is that you are making an effort to correct what is out of balance. In conclusion, it won’t be long before even the most cynical amongst us will be asking “whats my ESG score?” Kudos to you for being ahead of the curve. Keep up the good work, and just maybe we turn this mess around.

Caveats, disclaimers & personal ESG scores

At ESG | The Report, we believe that we can help make the world a more sustainable place through the power of education. We have covered many topics in this article and want to be clear that any reference to, or mention of ESG, sustainability, carbon, audit or investing in the context of this article is purely for informational purposes and not to be misconstrued as investment or any other legal advice or an endorsement of any particular company or service. This also includes the mention of or writing about esg performance, bloomberg esg data services, esg investing, esg factors, corporate governance, risk management, corporate sustainability performance, collecting esg data, esg rating agency, esg disclosures, esg rating agencies, supply chain, ESG scores, company’s esg score, rating agencies, financial institutions, esg issues, corporate disclosures, esg rating, esg metrics, asset managers, esg scoring, esg reports, scoring system, corporate reporting, investment decisions, sustainable companies, company’s carbon emissions, environmental scoring factors, corporate boards, bad or good esg scores or climate risk. We highly recommend that investors use a financial advisor, certified financial planner or investment professional before entering the markets. Thank you for reading, and we hope that you found this article useful in your quest to understand ESG and sustainable business practices. We look forward to building a sustainable world with you.