Why Invest in ESG? 5 Reasons For 2021

Investing has long been a part of the wealth accumulation process. Funding the launch or continued growth of companies and businesses is a vital aspect of world economies. As investors seek new opportunities, a more granular focus on the sustainability and social impacts of business operations has gained importance. Environmental, Social, and Governance (ESG) investing serves to put those factors at the forefront of investment decision making.

Why Invest in ESG

What is Environmental, Social and Governance (ESG) Investing?

  • Greenhouse gas emissions
  • Racial disparities in pay and equitable treatment
  • Human rights positions
  • Pollution and toxic byproducts of manufacturing
  • Corporate management practices
  • Diversity in the workplace
  • Animal welfare
  • Discrimination based on gender and sexual orientation

ESG is ethical investing, and is based closely on a company’s position on the above factors as well as how it is managed. The goal of ESG is to provide sustainability and long-term performance in the investment process.

The Case for ESG Investing

Historically, investors believed that investing in companies that put environmental and social concerns first would be a recipe for poor returns. Sustainable and responsible business practices were seen as too expensive, ultimately impacting the ability of a given company to maximize profits. It was not until the beginning of the 21st century that ESG demonstrated its value; consumers are more aware of climate and social issues and tend to support those companies that align with their ideals. By taking advantage of investment products and analyzing ESG factors and ESG data, investors gain significant advantages. ESG investments represent a path forward, putting stewardship above sheer profits and ensuring an equitable landscape for all.

Socially Responsible Investing

SRI goes hand in hand with ESG. In fact, ESG integration into investment management is a valuable addition to the concept of being socially and environmentally responsible. An investment portfolio heavy on companies that adhere to social and corporate governance (ESG factors) tends to perform better, on average, than a similar portfolio that includes companies with negative factors. Funds raised by investors help responsible companies to grow, further generating opportunities for positive changes in social dynamics and in environmental issues.

Investment Advice for ESG

Hoboken financial professional, portfolio manager, and qualitative consultant. President of Elysian Charter School and treasurer of Hoboken Quality of Life Co.