ESG investing — that is, investing in companies with strong environmental, social, and governance profiles — is among the most talked-about subjects in company board meetings and among investors.
Explaining What ESG Means
Thousands of investors consider a company’s ethics and environmental impact before investing. In terms of the work environment and the company’s overall goals, social and governance considerations are more important to these investors. When it comes to determining whether or not to invest their hard-earned money in a firm, these factors are equally as significant to some investors as financial aspects. ESG investment entails taking into account a company’s strategies and progress in the following areas:
- Environmental: Future investors are interested in learning what actions companies are taking to protect the Earth’s resources while continuing to operate in a sustainable manner. What is the company doing to save the environment?
- Social: Some investors believe it is also vital to understand a company’s relationships with its personnel and vendors. Do they give everyone an equal chance? Are they friendly and approachable to other businesses, consumers, and the community in which they operate? What role does the company play in the community’s growth and success?
- Governance: ESG investors are also interested in knowing what safeguards a firm takes to monitor its board of directors and management team. What policies and procedures are in place to ensure that the firm is managed appropriately and fairly, and that all employees have equal chances regardless of their demographics?
This is where the infographic comes in handy. Regulatory fines, disgruntled shareholders, public shame, and other potentially damaging, value-obliterating events are less likely in organizations with strong ESG scores. Furthermore, organizations who manage their people in a socially responsible manner have lower employee turnover and a more engaged and productive workforce. These and other characteristics make high-scoring ESG companies ideal long-term investment possibilities. Continue reading to find out more.
