ESG investing has grown in popularity in recent years as societal issues like climate change require a bigger response and more people begin to be interested in the ethical values of companies before buying from them. These investments have crept into almost every investor strategy, and industries have started to shift in favor of those tackling real-world problems.
When it comes to ethical investing, many assume that buying stocks in the real world doesn’t really make a difference, but Galina Stavskaya, investment director at Claro, says otherwise: “More and more investors are now looking to ESG investing as their preferred method because of their proven effectiveness. “
ESG investing has now found its way into even the most traditional investing practices, as the industry now realizes that companies that address some of the world’s biggest problems like climate change are more likely to succeed.
Ms. Stavskaya shared five of her most useful tips for investing in ESG:
Be confident in your decision
It is recommended that investors take the time to research all of the options available in relation to companies, sectors and strategies. ESG investments are essentially based on the values and societal actions of an investment. Therefore, it is of the utmost importance to make sure that the company’s values align with your own.
Ms. Stavskaya said, “While deciding which companies to invest in can be difficult, there is plenty of time to master this decision-making process as you can be sure that ESG investments will last. The research will take a little longer than with conventional investments, but can be an extremely beneficial way to invest your money with good potential returns and a clear conscience.
“It’s a positive way to put your ethical and environmental concerns into action. It can turn your thoughts and beliefs into tangible impact as you can empower business and support companies that prioritize these matters, ”commented Ms. Stavskaya.
Decide if ESG investments are right for you
“ESG investing simply measures how sustainable and socially effective an investment in a company will be. Planning your investments with an ESG strategy is a way to generate financial return and drive social and environmental change.
“At Claro, we believe that most of us want companies to do more to protect the environment, take care of their employees, or make sure their business practices are ethical. If you’re okay with that, then ESG investments should definitely be considered. “
Understand the ESG categories
ESG has three categories – environmental, social and governance – and Ms. Stavskaya explained what they mean.
environment – “This category focuses on the methods a company uses to preserve and help the environment, with an emphasis on waste, pollution and climate change initiatives,” she said.
Social – “This measures the company’s interactions with its employees, its community and its customers, including employee representation, relationships and working conditions.”
Governance – “This category focuses on the corporate side of the business and takes into account the management, policies, regulations, and conduct of a company’s executives.”
Some companies may fall into all three ESG categories while others fall into only one or two categories, and many factors that influence these categories overlap.
“Think about which values are most important to you when making an investment decision,” said Ms. Stavskaya.
Understand ESG scoring systems
To understand if a company is truly ethical, you need to review the industry ratings that match the three ESG categories.
Ms. Stavskaya commented, “An ESG score tells you how well a company is doing on the environmental, social and governance standards used for the analysis and ranking – this is also known as the ESG ranking.
“But be warned: scoring and rating systems are not universal. Some investment agencies use a one-to-five method while others use a letter method, and there is still no one-size-fits-all method of defining and measuring ESG impact.
“Also, there is no regulator that reviews ESG information in the same way as financial information.
“A company’s ESG score is measured against the SDGs, also known as the Sustainable Development Goals. These goals are goals set by the United Nations to be achieved by 2030 that aim to create a more equal and sustainable future for all.
“When you consider how your spending and investments contribute to the SDGs, you can make more ethical financial decisions,” she commented.
Pay attention to “Green Washing”
A company that appears ethical could hide behind a haze of good marketing and small print. The real workload of researching an ESG investment is figuring out whether a company is truthfully ethical.
“Companies spend a lot of money on marketing and use buzz words like ‘sustainable’ and ‘bio’ to present themselves as environmentally friendly, when in reality their efforts are largely superficial and their manufacturing and employment processes contradict such claims. When it comes to certain areas such as carbon emissions, some companies have proven to be untruthful. “
Ms. Stavskaya added, “Make sure you dig a little deeper into a company’s green policies by looking at the third-party articles that have been written about them, rather than just the information on their website’s sustainability page. Alternatively, look for professionally managed mutual funds with a credible ESG investment identification process. “
Share this news on your Fb, Twitter and WhatsApp
File source
News Nation USA: Current headlines
News Nation USA || USA News || Science || Education || Sports || World
