What if you could invest your money in companies that operate in line with your values? You can through ESG investing.
In this article, you’ll learn what ESG investing is and how to get started investing in companies that are doing good for humans and the environment.
What is ESG?
ESG (Environmental, Social, and Governance) investing refers to a class of investing known as “sustainable investing.” These investments go beyond traditional equity and bond investing to include other types of assets such as stocks, bonds and exchange -traded funds (ETFs) that focus on companies with strong ESG attributes.
While ESG has been around since the 1960s, it has only recently begun to draw mainstream interest and attention.
What Does ESG Stand For?
ESG is an umbrella term used to define a variety of socially responsible investment practices. While each investor may define ESG characteristics differently, most people understand the term to mean investments that consider companies’ environmental, social, and governance impact, including environmental, social and governance impact, including environmental impact, social justice, and how companies are managed.
Investment Strategies Related to ESG
Over the past few years, ESG investing has been maturing and gaining wider acceptance. The financial press covers investment strategies more often related to ESG, including specific guidelines that reflect good corporate positive shareholder return; and performance benchmarks for environmental and social performance, along with issues about gender diversity.
These developments have sparked a conversation about the impact of company operations on society and the need for responsible management of capital.
There are two main reasons why ESG investing is so appealing:
#1 – Environment: ESG investing helps protect the environment and aids in preserving the climate. Companies that have a lower environmental impact create a more sustainable world.
#2 – Economy: The economy might be struggling, but if you invest in companies that are doing good, you can help them do well in today’s economy and help them innovate and fosther growth, all while, hopefully, giving you some return on your investment too.
#3 – Social consciousness: People want to invest in companies that support their values and don’t harm others.
How ESG Investing is Unique
#1 – It is a growing asset class. According to Morningstar and CNCB, ESG took in over 51 billion in new investments in 2020. Over double what it took in a year prior. ESG investing is growing.
#2 – It’s equal opportunity. Many ESG funds focus on emerging markets, which means people all over the world can participate simply by investing in their area.
#3 – It’s a long-term investment strategy.