In today’s topic, we will see about ESG Investing all you need to know if you haven’t heard bout the term already,
will read all about it on this topic. ESG stands for Environmental, Social and Governance investing
also known as socially responsible investing, green investing, ethical investing, sustainable investing,
socially conscious investing so on.
What Is ESG Investment?
ESG investing is a form of investing which focus on achieving the financial return at the same time doing the social good
and considering the social and environmental governance structure.
It does not approach the financial gain of the wealth and profit but also on the well being of others and nature,
directly or indirectly.
How Does an ESG Investment works?
If a company was making money it did not care about other issues and problems, because of this government came up
with the regulations that have been introduced overtime to ensure the company not only focus on the profit but also on
the way to operate in the interest of the minimum wages and pollution restriction.
There are various factors when investing but the most important ones are E.S.G.
wherein ESG stands for Environmental, Social, and Governance.
Uner Environmental consideration includes pollution and Animals welfare,
Social factor considers Human rights, employee considerations, and community engagement,
and Governance maintains refers to Diversity and how the company manages those of the top along with its profitability.
Well there 2 strategies used to evaluate the value of the companies considering the E.S.G Strategy:
1. Negative Strategy and
2. Positive Strategy
- Negative Strategy:
It implies removing companies from the universe of stocks to be invested in based on some of the trade,
tobacco, firearms are the company most of the time face this kind of issue.
Other companies with red flags like cases on them, like environmental hazard, Human rights violence, or fraud.
- Positive Strategy:
It is more active it looks to invest in companies that are not only actively benefiting or supporting positive,
but also initiative along with operating their business.
for Ex: Investing in the companies that are focus on Renewable energy and etc
As a Positive strategy applies the companies create employment opportunities.
There is various investment strategy similar to this investing like :
1. Impact Investing and
2. Community Investing
These are a specific kind of investing where companies not only focus to address on a specific impact,
but also increase the wealth factor and aims to provide a better return to their investors.
Wherein, community investment seeks to find community outcome by providing to those community,
Help to serve better outcomes and develop.
Well, all these approaches are good and provide a definite social value to society but as an investor,
it does not provide you the financial benefits along with the development of society,
but it becomes more of a Donation than an investment.
Benefits of ESG Investing:
- Research shows that high suitability firm tends to have long term planning
- companies with high suitability tend to perform better
- Higher financial return.
- provides to reach their financial object while supporting their objective.
In summary, we have covered ESG Investing All You Need To Know,
having said all that of course and there plenty of argument there about and against ESG Investment,
so a simple google search and bring up plenty of results in about result,
which will help you understand the broader meaning of it.
but at the very least taking an extra step to consider the ESG factor while making an investment will not
only bring you the return but also helps you contribute to the society.
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