What Exactly Is ‘ESG’ Investing?
The investment products mentioned and information in this article are for illustrative purposes only. They are not – and are not intended to be interpreted as – any form of financial or investment advice or recommendation.
Gone are the days when everyone is investing just to make the big bucks.
Yes, financial returns are still one of the primary drivers for people investing their hard-earned money, hell, it’s the definition of the word! However, in recent years, people have started to ask of their investment providers, ‘Where exactly are you putting my money and why is it all invested in this company that’s digging up fossil fuels and polluting our planet?’
So fund managers listened, and they began screening stocks, bonds, funds and investment products based on ‘ESG’ factors, which stands for Environmental, Social and Governance factors. ESG investment funds were created which took into account environmental factors such as whether a company was in the fossil fuel industry, social factors like supply chain and labour standards and how the company was governed such as ethical considerations or possible conflicts of interest in the company’s senior management.
This ‘ESG’ screening has done a good job of stemming the flow of investment into companies that don’t have their heart in the right place. ESG funds and considerations are rapidly growing, but relatively speaking still represent a very small subset of all investments made globally.
Furthermore, traditional ESG investing practices simply avoids investment into companies that do harm or have a negative impact on the environment or society. Here at GreenGrowth we go one further, we only offer investments that are actively benefiting the environment, another word for them would be climate-change solutions; companies that are working to reverse global warming and make our world a better place.
And the good news is, as well as having a big-old feel-good factor, investment in climate change solutions makes good business sense! Countries and governments have legally binding mandates to reduce their carbon emissions, such as the Paris Agreement. That means the growth of these companies is driven by new regulatory and societal tailwinds, because they are the companies we need right now, to halt and eventually reverse climate change and its devastating effects on our planet.