What is ESG investing? 

This is a question that more and more investors are asking themselves as they become interested in sustainable, responsible, and ethical investing. There are many different definitions of ESG investing, but in general, it refers to investments that consider environmental, social, and governance factors when making decisions. In this blog post, we will discuss the basics of ESG investing and why more and more people are choosing to invest this way!

Why choose ESG?

There are many reasons why people choose to invest in an ESG fund. Some investors want to make a positive difference in the world and support sustainable businesses. Others believe that companies with strong ESG ratings will outperform those without good ratings over the long term. And some investors simply want to avoid investments in companies that they deem to be unethical or irresponsible.

an investor might want to avoid investing in a company that manufactures cigarettes. due to the health risks associated with smoking in the greater population.

or an investor might want to invest in a company that is a leader in renewable energy. and avoid energy traditional energy companies

Ethical ETF’s

One way to invest in ESG is to purchase an exchange-traded fund (ETF) that invests only in companies with strong ESG ratings, 

There are many different types of ESG funds available, and the best one for you will depend on your investment goals and your ethical views.

 If you are interested in making a difference in the world, you might also want to invest in an impact fund. These funds invest in companies that are working to solve social or environmental problems.

How is ESG measured?

There are several different ways to measure ESG performance. One popular method is to use ESG ratings from research firms like MSCI, Sustainalytics, and Morningstar. These ratings give investors an easy way to compare the ESG performance of different companies and make investment decisions accordingly.

Another way to measure ESG performance is to look at a company’s environmental, social, and governance disclosures. These disclosures provide information on a company’s policies and practices related to environmental and social issues. They can be helpful for investors who want to get a more in-depth understanding of a company’s ESG performance.

When Companies fail ESG criteria

There are a number of companies that have failed to meet ESG criteria in recent years. For example, in 2018, ExxonMobil was ranked as the worst company in the world for climate change by the Carbon Majors Report. The report found that ExxonMobil was responsible for more greenhouse gas emissions than any other company in the world.

Another example is Volkswagen, which was embroiled in an emissions scandal in 2015. The scandal came to light when it was revealed that Volkswagen had been using software to cheat emissions tests. This led to widespread outrage and resulted in the company’s stock price plummeting.

These examples show why it is important for investors to consider a company’s ESG performance when making investment decisions.

ESG is a sliding scale

It’s important to remember that ESG is not a black-and-white issue. There is a lot of grey area, and companies can fall anywhere on the spectrum from bad to good. For example, a company might have strong environmental policies but weak social policies. Or a company might have good ESG ratings but be involved in a controversial industry.

Just because a company is deemed to have good ESG does not mean it will be deemed ethical to you personally

Whatever your reason for considering ESG investing, it’s important to do your research and make sure you are investing in a way that aligns with your values. If you are interested in learning more about ESG investing reach out to your financial advisor.

Have you ever considered investing in an ESG fund? What was your reason for doing so (or not doing so)? Let us know in the comments below!