Greener Future: Power of ESG Investing

Is ESG investing all it’s cracked up to be? Many people are sceptical about the claims made by proponents of ESG investing. Still, there is some evidence to support the idea that it can be beneficial for both companies and investors.

Let’s make everything more clear and start with an introduction. ESG investing is ethical investing that considers environmental, social, and governance factors when making investment decisions. It helps people to align their investment choices with their values.

Intelligent ESG investing is bound to become the new normal.

George Kell (2020)

Three pillars of ESG

As mentioned above, an ESG investing strategy focuses on environmental, social, and governance issues. Companies and investors want ESG pillars to work in harmony with companies. These criteria consider how well public companies safeguard the environment and the communities where it works and how they ensure management and corporate governance meet high standards.

• The environmental pillar refers to a company’s environmental impact and risk management practices, including using natural resources, waste management, pollution levels, and carbon footprint.
• The social pillar refers to a company’s relationships with stakeholders. It relates to a socially responsible investing strategy and promotes ethical and socially conscious themes.
• The governance pillar refers to a company’s leadership, executive pay, internal controls, and shareholder rights. Companies avoid conflict of interest, is also may be required by the investors.

So, why is everyone talking about ESG these days?

One big reason is that we increasingly realise that our investments can make a difference. We want our money to do some good in the world and support companies that care about their employees, communities, and the environment.

And guess what? ESG investing isn't just about feel-good vibes. Companies with strong ESG performance might do better in the long run. They could be better prepared to face challenges and seize opportunities, a win-win for investors and the world! But hold on a sec! With all this buzz around ESG, some folks are sceptical. They worry it's just a marketing gimmick, and companies might stretch the truth to look suitable to investors. It's like putting on a fancy show without natural substance, which we call greenwashing.

Another concern is that ESG criteria can be tricky to measure. Unlike numbers on a balance sheet, ESG stuff can be more subjective and harder to compare. Some people wonder if ESG ratings truly show what a company is all about.

Don't let the naysayers rain on the ESG parade! Plenty of folks believe in the power of ESG investing to create positive change. And guess what? They might be onto something! Sure, ESG isn't a magic bullet, and it's not always about making a quick buck. Some say it's about balancing making money and making a difference. But who says you can't do both?

Let’s keep it real

As ESG investing evolves, it's up to all of us – investors, companies, and regulators – to keep things real and push for transparency. We need clear standards, reliable data, and honest reporting to know we're making meaningful choices.

So, what's the bottom line? ESG might be trendy, but it's not just a fad. It's a mindset changing how we invest and encouraging companies to step up their game. By supporting businesses that care about the world, we can be part of the positive change we want to see.

Let's remember that ESG is about progress, not perfection. It's a journey; together, we can make a difference, one investment at a time!