ESG, which stands for Environmental, Social, and Governance, is the term businesses use to describe a broad category of so-called “material, non-financial information.” This information is understood to be relevant to business performance but not reflected in conventional accounting. Financial analysts may be asked to produce or, more likely, interpret ESG data as part of a transaction or the evaluation of an investment opportunity.

Financial analysts involved with green building largely work in the commercial real estate industry and may work within financial institutions (e.g., banks, investment companies), property and infrastructure companies (e.g., global real estate, asset management), technical consultancies (e.g., firms whose line of business is focused on sustainability), and data companies (e.g., credit rating agencies).

Financial analysts may be asked to interpret ESG data with respect to regulations, policies, political situations, and economic trends. These circumstances and conditions change frequently and often vary from country to country. Consequently, financial analysts stay abreast of economic trends, investment strategies, and the expectations of government, advocates, and other market participants.

Increasingly, climate risk will be part of the risk and return assessments of many financial analysts. For example, with the newly enacted Local Law 97 in New York City, financial analysts will need to adjust their calculations of the financial performance of any (green) building in the city. In another example, pension funds and other large institutional investors will increasingly require their analysts to consider the new wave of data assessing flood risk and other climate events in their assessments.