When investing in the stock market, investors have historically used company profits, dividends, market share and growth prospects to determine if a company is a worthwhile investment. Now, many investors are also including the impact a company has on the environment and whether it’s committed to social diversity and equality. This additional screening for the Environmental, Social and Governance (ESG) impact aligns the values of a company with the values of the investor.
Environmental, Social, and Governance (ESG) Investing recognizes the generation of long-term sustainable profits is dependent on stable, well-functioning and well-governed social, environmental and economic systems. Social, Environmental and Governance issues impact the risk, volatility, and long-term return of companies. Avoiding environmental disasters, adherence to regulatory requirements, driving innovation and employee satisfaction are all benefits of ESG investing and support long-term profitability. In this sense the company considers all “stake holders” as opposed to just shareholders.
Whether you’re an experienced trader or a novice investor, anyone can build an ESG investment portfolio. The first step for ESG investors is to choose the issues that they want to focus on, then read studies and company reports to see which businesses match up.
Seeking a financial advisor that specializes in ESG investing may be a significant help. Their knowledge cannot only save you plenty of time searching out information, but also steer you away from investments that maybe guilty of “greenwashing”. Since there are no defined standards when it comes to companies reporting their ESG efforts (or lack thereof), nor requirements of investment funds to standardize their ESG investment process, confusion and obfuscation can occur. A knowledgeable financial advisor will help you find companies and investments that truly match your value objectives.
Environmental, Social, and Governance (ESG) Investing is choosing companies that tackle social issues, reduce their environmental impact, and provide a safe, diverse workplace for their employees. Investors will typically focus on themes (green-house gas mitigation), or impact investments (supporting minority owned businesses), or ethical issues (anti-tobacco).
ESG Investing allows investors to focus on companies that share their values, generating more satisfaction--and possibly higher returns. Influencing companies through investing can bring broader recognition to an issue and be financially rewarding.
Contrary to popular belief, ESG Investing isn't riskier than investing in traditional businesses without considering their values. In fact, with more customers turning toward diverse and sustainable businesses, people who choose ESG investments might see higher returns. Nothing's guaranteed in the stock market, but ESG investors may reduce their risk by avoiding environmental mishaps, regulatory violations, and/or getting ahead of social issues.
To make money in ESG Investing, talk to a financial advisor who can help you make wise investments. ESG investing has many different forms and jargon, so educate yourself. A clear objective is most important and executing on it by using a financial advisor that understands ESG investing is equally important.
Start building your ESG investment portfolio by talking to Oceanic Capital Management LLC. Our financial advisors evaluate your situation, discuss your goals, talk about potential outcomes, and guide your ESG investment strategies to maximize your chances of a high return. Reach out for a free consultation, then talk to us about services like investing, retirement planning, and saving for college.
Free Portfolio Risk Analysis