Earth Day is observed across the world every year to encourage people to take action against climate change.
We all want to make small changes to make the world a better place, and some of these changes can be made by the approach we take towards where we invest our money. Let’s take a look at Environmental, Social, and Governance (ESG) investing, what it means and the difference it can make for both your investments and the environment.
What is ESG Investing
ESG investing is a ‘responsible investment strategy’ that allows investors to build a more ethical portfolio by integrating environmental, social and governance (ESG) factors into their analyses.
Many investors may think about climate change or corruption when thinking about responsible investment, but a responsible investment strategy will consider more possibilities.
Here are some factors to consider by each category:
- Carbon emissions
- Air and water pollution
- Water usage
- Fossil fuel/green energy use
- Employee diversity
- Customer satisfaction
- Employee protection
- Sexual harassment and protected class policies
- Fair labour practices
- Human rights
- Board member diversity
- Executive salaries
- Conflicts of interest
- Shareholder rights
ESG investments can be very strict in what they include, and the criteria determining this classification are directly tied to a company’s structure and performance rather than personal values.
Investments can have an ESG score that determines how well they adhere to the given guidelines and consider the above factors.
The Rise of ESG Investing
Not only can ESG investing be better for the environment and social justice, but it can also be great for investors.
Many investors now see responsible investing not only as a way of having a positive impact on society, but as a way of obtaining positive returns. Research has shown that those companies that perform well on ESG factors are the most likely to gain sustainable returns in the future.
How to Get Started with ESG Investing
If you’ve decided that ESG investing is aligned with your personal goals and values, it’s easy to get started.
There are plenty of good reasons to work with an Abbey Wealth Adviser and help with ESG investing strategies is one of them. Our advisers are able to get a high-level view of your entire financial life, including details like personal values that could be used to tailor an ESG strategy to your worldview.
ESG investing can be a lasting strategy to help you create a portfolio that reflects your values. As we grow as a global community and educate each other on ways to protect our planet, we will likely see an even more dramatic increase in ESG investing. However, regardless of your views on the future, long-term success is one goal that unifies all investors. Abbey Wealth believes that investments that consider E, S and G metrics can help you pursue long-term success of your portfolio and contribute to a more sustainable world.
We at Abbey take climate change, Environment and Social Governance very seriously and are building a range of polices to meet with our approach to this.