Environmental, Societal, & Governance (ESG) investing is choosing to align your beliefs with your investing.
Environmental – looks at how the company is impacting the environment
Societal – explores the company relationships within it, its vendors, and the effect it has on the communities.
Governance – deals with the company’s leadership.
Disclosure: I am not compensated by any of the websites I recommend and all information is for educational purposes.
Broader Look at ESG
| Environmental | Social | Governance |
| Carbon emissions | Employee gender and diversity | Diversity of board member |
| Air and water pollution | Data security | Political contributions |
| Deforestation | Customer satisfaction | Executive pay |
| Green energy initiatives | Company sexual harassment policies | Large-scale lawsuits |
| Waste management | Human rights at and and abroad | Internal corruption |
| Water usage | | Lobbying |
| Nerdwallet.com | | |
ESG for Every Investor
There is an ESG for everyone. As with all funds there are risks and fees. It’s important to determine your goal and horizontal timeline. If you are a hands-on investor, it may take some time to learn, but it doesn’t have to be complicated. ESG investing has become very popular, so there are plenty of passive funds available. If you are a hands-off investor, it’s not hard to add an ESG fund to your portfolio.
Due Diligence
The trick with these funds is due diligence. Once you have determined your theme, you can’t blindedly trust a labeled “ESG” fund is aligned with your belief. It’s important to be aware of greenwashing and do your research to see what companies make up the fund. For instance, the ESG may have a significant portion going towards climate change, but it may also invest in Exxon. Another consideration is the managing company. Does their engagement in these issues matter to you? If so, doing research on the managing company is necessary.
Takeaway
The key takeaway is research. Not all ESG funds are created the same and it’s crucial to do your homework. Companies like Domini and Calvert are making it easier for individuals to invest not only in their theme but with a managing company that is engaged. They provide reports, so investors know how their capital is making an impact.
Mindful Reminder
Asking yourself why this type of investing matters to you. Spend time by yourself and reflect on the changes you wish to make with your capital. You have the potential to invest for yourself and make a better world for those you love.
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Related Posts
Forbes. (2022). Environmental, social and governance: what is esg investing? Retrieved from: https://www.forbes.com/advisor/investing/esg-investing/
Investopedia. (2022). What is environmental, social, and governance (esg) investing. Retrieved from: https://www.investopedia.com/terms/e/environmental-social-and-governance-esg-criteria.asp
Nerdwallet. (2022). Environmental, social and governance (esg) investing and how to get started. Retrieved from: https://www.nerdwallet.com/article/investing/esg-investing