Increasingly, companies are using environmental, social and governance (ESG) strategies as a way to enhance their business and create value. These initiatives often result in a competitive advantage, reduced operational costs and lower risk exposure.
How do I know which investments are ESG?
It’s no wonder that investors are paying more attention to sustainability. It’s become a major driver of long-term investment performance and the majority of investors consider ESG factors when making their investing decisions.
ESG Have to do with Sustainable Living? ESG criteria are becoming more important for investors because they help avoid companies that have been involved in high-profile controversies over human rights, animal welfare, environmental concerns, product safety or governance issues. They are also a way for investors to avoid the pitfalls of unsustainable practices that can have a negative impact on a company’s stock price and financial performance.
One of the best ways to ensure you’re investing in green companies is to buy shares of B Corps, or Benefit Corporations. These businesses have been certified to meet stringent criteria on all aspects of sustainability including energy use, employee benefits and waste reduction.
You’ll see that these companies report on their progress to the public through an ESG reporting framework. The framework combines financial components that involve investment decisions with environmental, social and governance factors to provide a full view of the company’s operations and its impact on the world.
Creating and adopting an ESG strategy is a significant step that requires an internal commitment to making sustainability a priority and central to the company’s culture. This commitment should begin with a chief sustainability officer, who is typically the person closest to the company’s most material ESG issues.