Different institutions and funds have different ways of looking at environmental, social, governance and ethical issues. These are explained to potential clients through criteria and policies (the main difference between the two being that policies are more detailed). Fund policies and criteria set out how a fund will deal with these issues, which in turn helps direct where a fund will and won’t invest.
Environmental issues (which should be explained in an investment fund's published ‘policies’ or ‘criteria’) consider a company’s impact on the planet, and may involve considering issues like climate change, biodiversity loss and plastics.
Social criteria consider how a company manages its relationships with employees, suppliers and the communities it operates in – or, in other words, people.
Governance relates to company management and leadership and may focus on issues like executive pay, audits, internal controls and shareholder rights and responsibilities.
Many funds also consider ethical issues which relate to personal values and concerns, which do not easily fit within the groups above. These include issues like armaments, tobacco, gambling and animal welfare.