What is the benefit of companies having a good ESG score?

Having a good ESG (Environmental, Social, and Governance) score provides the benefit of being perceived as lower risk by lenders. This occurs because a strong ESG score indicates that a company is managing its environmental impact, maintaining ethical governance practices, and being socially responsible. Lenders often view companies with high ESG scores as more stable and less likely to face legal or reputational issues, which can lead to financial losses. As a result, these companies may benefit from lower interest rates on loans and a greater willingness from lenders to extend credit, reflecting a lower risk profile.

Other options might touch on positive aspects related to a good ESG score, but they don't directly align with the core financial implications for lenders. Popularity on social media or increases in shareholder dividends, while potentially linked to a strong ESG approach, are not as directly tied to the financial assessments made by lenders. Lower taxes could result from various factors, but ESG scores are not typically a determining factor in tax responsibilities. Thus, the perception of lower risk is the most clear and immediate benefit when companies have strong ESG scores.