ESG Investing Explained
ESG is a type of ethical investment strategy that considers more than just the bottom line and instead looks at the impact that an investment will have across the three key areas, and, also which companies or investment vehicles are addressing these issues, and crucially which are not.
Under ESG investors want to see their investments benefit wider society and the environment, not just the balance sheet, and they want the businesses that they invest in, to be run to high standards of corporate and ethical governance.
What does ESG Investing Stand for?
You may have heard quite a lot recently about ESG investing but just how much do you really know about it? Should you try it? And if so how?
The three letters stand for Environmental, Social and Governance and they have become something of a mantra for more social and ecologically responsible investing.
This type of investment approach has its roots in NGO’s, not for profits and community projects but it’s increasingly becoming a factor in mainstream investing as well. Particularly as we become more conscious of our collective environmental and social responsibilities, and the footprints that we leave behind us in our everyday lives.
As well as assessing an investment opportunity on its financial merits and performance ESG investors will want to run the opportunity through a matrix, such as that in the table below and screen and score its performance against these kinds of criteria.
|Fossil fuel consumption||Observing human rights||Track record|
|Pollution and emissions||Anti-slavery or child labour||Independent management|
|Effect on the environment||Community outreach and projects||Transparency and management of conflicting interests|