We all want to make small changes to make the world a better place, and some of these changes can take place through your investment portfolio! This article discusses Environmental, Social, and Governance (ESG) investing, how to get started, and the difference it can make for both your investments and the environment.
Discover ESG Investing
Incorporating an ESG strategy with your traditional portfolio allows you to align your investment choices with your personal values. ESG investments are very strict in what they include, and the criteria determining this classification is directly tied to a company’s structure and performance.
Here are some factors that are considered by category:
- Carbon emissions
- Air and water pollution
- Water usage
- Fossil fuel/green energy usage
- Employee diversity
- Customer satisfaction
- Employee protection
- Sexual harassment and protected class policies
- Fair labor practices
- Human rights
- Board member diversity
- Executive salaries
- Conflicts of interest
- Shareholder rights
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
ESG investments have become increasingly popular for investors over recent years. In fact, a recent report predicts that ESG-oriented assets under management will more than double to $10.5 trillion by 2026.1,2
Plus, the diverse availability of different ESG investment funds may fit more directly with your values. For example, you can invest in a company that is championing green energy initiatives or one that is working to become carbon neutral or even carbon negative. Or, you can support companies that live up to your social values in areas such as equal hiring practices, promoting women, etc.
How to Get Started with ESG Investing
If you’ve decided that you would like to add an ESG strategy to your portfolio to align your investments more closely with your personal goals and values, it’s easy to get started.
The first method is to examine your portfolio and include ESG companies. You can find ESG investments that align with your financial goals, risk tolerance, and personal values by doing your research. ESG investments can include both individual stocks and mutual funds.
Another option is to work with a financial advisor who has experience with ESG investing. Look for an investor who believes in being a good global citizen through their business practices and the investment options they offer their clients.
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 and enhance our society, we will likely see an even more dramatic increase in ESG investing.
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