ESG Investing, What Is It?

One of the hottest subjects talked about in corporate board rooms and among institutional investors is ESG investing – that is, investing in stocks with positive environmental, social and governance profiles.

ESG is a lot more than just talk, however. A recent study from the Callan Institute showed that the use of ESG factors in investment decision-making increased to 42 percent in 2019, with endowments and foundations leading the charge.

Various reasons explain the increasing interest in ESG investing – the most prominent of which are described in the infographic below, An Overview of ESG Investing. For any investor seeking a better perception of ESG, and for any business interested in maximizing its worth and ability to draw investment capital, the infographic is an excellent place to start.

It is well understood that Millennials, whose influence on investing is already meaningful and quickly rising, place significant value on socially responsible business practice. In addition, ethical investment can be important for businesses as they may need to look out for governance risks. In that regard, corporate governance scoring software can be helpful for new business owners who prefer to manage risks associated with actual or perceived corporate governance issues. This can also help them identify and manage corporate governance risk. That said, what is perhaps less understood is how socially responsible business behavior translates into making a company more profitable, and thus, a better investment opportunity. The infographic is helpful on this issue, too.

Recently esg analysis is potentially telling individuals a lot about a company. Companies with strong ESG scoring have less susceptibility to regulatory fines, shareholder uprisings, public scandal, and other potentially destructive, value-obliterating occurrences. Also, companies that treat employees in a socially responsible way are less likely to experience turnover and more likely to have an interested and highly efficient workforce. These characters and others make high-scoring ESG companies excellent candidates for strong long-term returns. To learn more, continue reading