ESG is a very uncommon word you might have heard of it a few times in other words but maybe you didn’t even know what it actually meant.
ESG stands for Environmental, Social, and Governance. Investors are increasingly applying these non-financial factors as part of their analysis process to identify material risks and growth opportunities.
ESG investing is commonly known as socially responsible investing where investors consider ESG factors or outcomes with this investments are made with the consideration of the environs and well being of other humans.
Over recent years, there’s been a significant rise in ESG investing, helped along by the recent COVID-19 pandemic, where many people have recognized the trend between social, environmental, and economic issues.
Advantages of becoming an ESG investor
There are many advantages of becoming an ESG investor. Not only can you invest in the things you may believe in, and feel most strongly about, but you can use your capital to make a real change in the world.
By becoming an ESG investor, you’ll also be rewarding ethical companies, helping to fund their changes, and hopefully making a return on your capital, as ESG issues become more prominent in society.
Disadvantages of becoming an ESG investor
Some disadvantages, however, might prove that ethics could become more important than the performance of your stocks. A crucial trading strategy is to not let your emotions fuel your trading decisions, and when investing in something you feel strongly about, this could be made slightly harder.
On top of this, many companies may claim to be socially responsible, but don’t actually take any actions to prove this.
Sample cases of ESG investing..
- Climate change – very popular.
- Waste and pollution
- Human rights
- Working conditions
- Equal opportunities
- Business ethics