As an investor, you probably have a strategy you use to identify the right investments to add to your portfolio. This could include factors such as the stock’s price, performance history, potential returns, and so on. But did you know you can also add environmental and social sustainability to your investment criteria?
You have probably heard about ESG investing. ESG has quickly become a popular concept for businesses and investors as the world moves towards sustainability. But what is ESG? Why is it important? And more so, how do you invest in ESG stocks?
Here is a quick guide to all you need to know about corporate ESG:
What Is Corporate ESG?
Environmental, Social, and Governance, also known as ESG, is a holistic approach to doing business. It guides a business in creating a strategy for managing opportunities and risks that extend beyond environmental sustainability and onto social and governance aspects.
ESG has three dimensions:
- Environmental: this aspect covers an organization’s environmental impact and its steps to manage the effects.
- Social: the societal pillar covers a company’s relationship and impact on society. That is how it treats and relates with its employees and its community.
- Governance: this last aspect is about how an organization is managed. This includes the management policies and strategies and how they are aligned with stakeholder expectations.
Usually, ESG is a concept used in relation to investors and business stakeholders. However, there is a growing interest in ESG among customers, employees, as well as suppliers.
Why Is Corporate ESG Important in Business?
ESG is increasingly becoming a key concern in business and investing. In a rapidly evolving business landscape, companies and organizations embracing corporate ESG strategies are better placed to adapt to changes and take advantage of opportunities.
Also, businesses that include ESG in their strategy attract more investors, especially those that value environmental and social sustainability. And as more investors become more informed about their investments’ impact, implementing ESG practices is more necessary than ever. Not forgetting, implementing ESG can also help companies get and retain top talent and customers.
Overall, implementing ESG actually benefits a business in more ways than one.
How to Invest in ESG Stocks
Implementing an ESG investing strategy means looking for stocks and funds that score highly on the environmental and social sustainability scale.
Now, several independent rating metrics gauge companies’ impact and policies and rank them on their performance on the three ESG factors. Alternatively, you can find an investment manager or service focusing on environmentally and socially responsible investments.
ESG is the Future of Investing & Will Continue to Grow
If you are an investor who cares about corporate impact on the community and people, then ESG investing is the only way to invest. With ESG, you can directly contribute to the push for businesses to mind their impact on the world. So, whether you are new to investing or want to add investments to your portfolio, definitely keep ESG factors in mind.
