What is ESG Investing?
ESG investing stands for environmental, social, and governance investing. Therefore, in addition to considering financial factors when investing, ESG investing also considers environmental, social, and governance factors. However, global sustainability is commonly referred to when people talk about ESG.
When a company decides to put solar panels on its facilities and distance its reliance on fossil fuels, it is taking part in ESG investing. When a company chooses to invest in innovating new types of packaging to reduce the amount of toxic waste its products cause, it is taking part in ESG investing. Whenever a company invests in sustainable technologies or practices, it is taking part in ESG investing.
In today's world, climate change has become a terrible issue. In response to the adverse effects of climate change, many people have recently started to raise awareness about this issue. Hurricanes continue to become more dangerous year after year. Wildfires only seem to strengthen. People are beginning to realize that our future is in trouble if this issue is not addressed.
Furthermore, millennials have begun to step into leadership roles at many companies across the world. As a result, they are beginning to have some level of influence either over the companies they work for or the companies they have created. Because environmental sustainability is something that millennials are very passionate about, companies have started to shift their focus toward ESG investing.
Additionally, emerging technologies and new innovations, including artificial intelligence and big data analytics, have made it easier to measure the results of ESG investing. For instance, a company can now definitively say that it has reduced its carbon footprint by 20% over the past year due to its ESG investing. The ability to see these results encourages them and others to do more.
These trends are why ESG investing has recently received so much traction. Organizations have even begun to develop ESG departments within their groups and hire talent specifically focused on this area. With this new revolution, ESG investing could be the solution to our climate change woes.