The ESG in ESG investing stands for Environmental, Social, and Governance. ESG investing is a form of socially responsible investing that prioritises financial returns along with a company’s impact on the environment, its employees and stakeholders. It is becoming a more commonly adopted practice as investors take into consideration more than just profit in their investing strategies.
Likewise, companies are becoming increasingly aware of their ESG footprint. But it can prove difficult to gather all the relevant information to ensure you are making a well-informed decision on whether a company meets or doesn’t meet ESG criteria. A great solution is to engage the services of a local Geelong Financial Planner, like The Hrkac Group who can do the groundwork for you.
There are many reasons for adopting a more sustainable investment approach. Some investors see it as a way to increase returns; many consider companies with a higher focus on ESG to be more forward-thinking and future proof.
During recent market turbulence related to the pandemic, many companies with strong ESG focuses showed lower volatility than non-ESG focussed companies. For others, it’s important that their investments align with their values. For example, an investor may choose to avoid investing in companies without carbon offset policies as climate change is an environmental issue of high importance to them.
While uniform methods to evaluate different ESG metrics are in the early stages of development, Investors can utilise various analytical approaches and data sources when determining what to invest in. Companies committed to ESG initiatives should be publishing measurable goals and their progress against those goals, in regular sustainability reports. A local Geelong Financial Planner, like The Hrkac Group can assist you in finding the pertinent data.
Read on for a breakdown of the different ESG metrics you can consider when determining where to invest.
The environmental component of ESG investing considers how a company’s practices affect the planet. Some examples include:
The social element of ESG investing covers how a company treats its employees, customers, consumers, suppliers, and the local community. Some examples include:
The governance component of ESG investing relates to business ethics. Some examples of this include:
There are multiple ways you can apply ESG principles to your investment strategy. You can employ an exclusionary approach, in which the investor eliminates companies according to the above criteria before deciding on where to invest. Another approach is to incorporate ESG as an additional factor within a broader decision-making process. ESG investing offers the chance to vote with your dollar; where you invest your money can be a powerful way to support communities, fair wages, and a healthy planet.
If you’re interested in knowing more about the world of ESG investing, speak to the expert Geelong Financial Planning team at The Hrkac Group. We consider your individual needs, goals, and objectives and work strategically with you to develop a tailored strategy aimed at achieving your desired financial outcomes. Make an appointment today via contact us, or phone (03) 5221 2355.