What is ESG Investing?
There are many different investing philosophies that fall under the massive umbrella of socially responsible investing. One of the most popular practices is known as ESG investing.
ESG is an acronym that stands for environmental, social and corporate governance. The main idea that differentiates ESG from other forms of responsible investing is that it ranks companies using these non-financial parameters. The belief is that generally, those who succeed in these areas also perform well in the stock market. To fully understand what these benchmarks are, let’s breakdown what environmental, social and corporate governance really means.
E is for Environmental.
The environmental aspect requires companies to implement a variety of healthy and eco-friendly practices that benefit the environment.
According to ESG Investing Companies some of these important components include:
- Climate change policies
- Greenhouse gas emission practices
- Regulating water usage
- Reducing their carbon footprint
- Proper disposal and recycling practices
- Movements towards renewable energy
S is for Social.
The social aspect consists of people related practices like a company’s culture, as well as other issues that directly impact stakeholders.
Some of these components include:
- Proper employee training
- Competitive salaries/benefits
- Employee safety policies to prevent assault and harassment in the workplace
- Diversity and inclusion
- Friendliness and responsiveness to their consumers
G is for corporate Governance.
The corporate governance aspect analyzes the ideals and actions carried out by shareholders to determine whether their incentives truly align with the success of the business.
These components (or practices) include:
- The structure of incentives for top executives
- Diversification of board members
- Corporate voting stipulations
- Proper transparency and communication to stakeholders
Grow Your Wealth While Helping Your Environment
Now more than ever, people are profiting off of these ethical investment strategies. With the amount of options available, there are sure to be investments that align with your personal and financial goals. With this careful selection process, you too can create the financial flexibility you deserve without the having to sacrifice the future of our planet.