What is ESG investing?


Although ESG investing is very topical, the term remains confusing to most investors. So what are the environmental, social, and governance factors that go into ESG?

The E or environmental in ESG measures a company’s impact on the planet, for example, through carbon emissions. More and more businesses are setting emissions goals. Microsoft has pledged to be carbon-negative by 2030. Google plans to run all data centers on carbon-free power like wind or solar. Other environmental factors include pollution, energy efficiency, and sustainability initiatives like reducing plastic packaging.

The S or social in ESG refers to a company’s relationships with its employees, customers, suppliers, and local communities. ESG investors try to assess how well the company treats its workers and customers. Social issues received a lot of press coverage during the coronavirus pandemic.

Amazon was criticized for running warehouses on a regular schedule at the height of Covid. However, it’s hard to quantify things like employee relations.

The G or governance in ESG measures corporate standards and shareholder rights. Unlike environmental and social metrics, governance has been on top of investors’ minds for a long time. Shareholders already vote on Board appointments and executive compensation each year. Learn more about ESG investing with Sustain Fi.

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