ESG Investing- What is it all about?
Read on in this latest blog by Simon Roughsedge on what you need to know about the growing trend of Environmental, Social, and Governance investing, and why it’s important.
As a world community, the majority of us are more aware than ever before of the impact of our living standards on the world around us. Most of us realise that our impact is more than climate change, pollutants and biodiversity, but includes matters of gender equality, diversity and general human rights.
In our day-to-day living, we can make choices about our spending, our reactions and interactions. But how do we do this when we invest our money? Should we simply close our eyes and hope that the corporations and governments etc we invest in follow our ‘hopes’? How do we know that our money is invested in places where they are held to account and actively move in the areas that concern us?
Over recent years, there has been a growing philosophy known as Environmental, Social and Governance (ESG) investing. This method has gained popularity as continuing concerns over climate change and social unrest persist.
ESG investing presents an opportunity for the average human to apply some of the below to their investment decision. Using ESG metrics and reference markers can help with making informed decisions for investment planning which ultimately affects our future (not just from a financial perspective). These metrics and markers help focus the pool of investment opportunities, which means that you are less likely to invest in companies at risk of social, political or financial downturns.
Examples of key ESG measurements to consider:
Environmental
- Climate change and carbon emissions
- Pollutants
- Waste Management
- Biodiversity
- Deforestation
Social
- Customer Satisfaction
- GDPR
- Gender and Diversity
- Human Rights
- Gender Pay Gap
Governance
- Board Diversity
- Corruption
- Audits
- High Level Compensations
- Political Involvements
Clearly, every company impacts the world around them and therefore by extension, so do we by investing within these firms. This is one reason why Clarus Wealth are pursuing a better understanding of our own impact by engaging with Planet Mark Ltd. Through their certification, Planet Mark will help Clarus Wealth to strengthen our Environmental, Social and Governance (ESG) strategy, contribute to the United Nations Sustainable Development Goals (UN SDGs), and set credible net zero carbon targets.
We see this as a vital part of sustainability, not just for Clarus and our clients, but for the generations to come. We want to be committed to the process and live by what we preach. Often this is a challenge and often this requires some sacrifice, but we are trying to put one foot in front of the other and steadily make progress.
If you are looking to better understand ESG strategies, then a financial advisor can help you by researching companies which also align with your interests and desired outcomes. Naturally, as this is becoming an increasing popular area, understanding the implications, the potential additional risks and carrying out due diligence is important.
Your advisor should be able to give you guidance on investment choices with high ESG ratings, and if you are yet to seek an advisor then ensure you enquire with potential advisors on the types of ESG options they have recommended to similar clients previously.
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