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There has been a huge focus on climate change and its ripple effect. While politicians are passing legislation focused on how to save the environment other people are building wealth by investing in the environment through Environmental, Social, and Governance (ESG) investing.
What is ESG Investing? Environmental, Social, and Governance evaluates both companies and countries on how far advanced they are with sustainability.
What are the three components of ESG?
Environmental aspect addresses how the company affects the planet through climate change policies, greenhouse gas emissions, carbon footprint and carbon intensity, water usage and conservation, over fishing, and waste disposal.
Social aspect places an emphasis on issues impacting employees, customers, consumers, suppliers, and the local community. Additional examples include employee treatment and compensation, employee engagement and turnover, ethical supply chain sourcing, and customer service performance.
The final component is governance. Governance relates to board independence, leadership effectiveness, and business ethics. Specific topics and examples include the following:
Executive compensation, bonuses, and perks.
Policies that define and enforce ethical business practices.
Diversity of the board and management team.
Potential for conflicts of interest for board members.
Shareholders’ ability to nominate board candidates.
Separation of the chairman and CEO roles.
Find out more about ESG Investing here with this video link
What are the advantages of ESG investing? ESG practices resulted in better operational performance in 88% of companies, the stock price performance of 80% of companies was positively influenced by good sustainability practices and lowered the cost of capital of 90% of companies. Additionally, according to Morning Star Inc. global sustainable fund assets has doubled in the past six months to $3.9 trillion at the end of September 2021. The top three ESG stocks are Linde (LIN), Xylem (XYL), and Sherwin-Williams (SHW).
Where to find the best ESG stocks? At this time I would suggest a simple google search on ESG stocks and you will be able to find articles and videos.
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