ESG from a Czech Point of View

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Over the past few years, the phenomenon of ESG has grown in importance at a breathtaking speed. Originally an instrument in the financial markets allowing investors to better assess the risks in their investments, ESG has further evolved into a major legislative effort of the European Union.

In countries with significant financial markets, ESG has become the market standard in recent years. In Central Europe, where financial markets are less developed and where less emphasis is placed on sustainability by society and politics, the focus has lied elsewhere. In any case, this appears to be changing. Nowadays, we observe a substantially increased interest in ESG matters, be it from our clients, the public, newspapers, or social networks. ESG is the new thing everybody focuses on.

Why has Central Europe been lagging behind? There seems to be no simple answer to this complex question. In the case of the former Eastern Bloc countries with centrally planned economies and state-owned means of production, the adaptation to the so-called “capitalist” economy was certainly a challenge, as privatizations were often executed inefficiently. This single challenge may have put Central European countries behind in all of the ESG categories, perhaps with the exception of social matters – which may be the legacy of socialist labor codes.  Other factors that may have delayed ESG development include the reliance on heavy industry, fossil fuels dependency, and inability to conduct reforms. These issues, however, appear to finally have been overcome.

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