What is ESG Investing?

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

EnvironmentalSocialGovernance
Carbon emissionsEmployee gender and diversityDiversity of board member
Air and water pollutionData securityPolitical contributions
DeforestationCustomer satisfactionExecutive pay
Green energy initiativesCompany sexual harassment policiesLarge-scale lawsuits
Waste managementHuman rights at and and abroadInternal corruption
Water usageLobbying
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.

Attend a Workshop

If you are interested in attending an live webinar on improving your relationship with your finances, please visit my events.

[expand title=”References“]

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

[/expand]