What is ESG Investing?
Hey! I know you stop by because you know this is hot rolling topic now!
Let's understand this in simple way!
What is ESG?
ESG stand for ( Environment, Social, Governance). Until now, the idea of investment has been to focus on “numbers” and “money”.
Looking back..
In past while doing investment in company we used to consider following points:
- Profitability
- Business Model
- Sector/Industries
- Competitiveness
After a time we started looking at CSR (Corporate Social Responsibility) activities of business. Which basically looking at companies activities towards society. But this wasn't enough, we were overlooking some important functions like company who is doing great in CSR activities but on the other hand they are dumping waste chemical in rivers and ocean.
That's when ESG comes to help. It's broader term. Now, we need to look at company's ESG activities ..
How to find if company is into ESG?
Of course you can always look for companies ESG rating on different Websites like;
- Ethisphere — Provides an annual listing of the World’s Most Ethical Companies.
- Fortune Change the World — Ranks companies that aim to make a profit while making a difference in the world.
- RobecoSAM — Dow Jones Sustainability Indices cover over 600 ESG indicators for over 4,000 global companies.
Nevermind , if you can't find it online you can always make an analysis by yourself . You have to look at the points I have mentioned below ;
- E- if it's manufacturing unit look for how company is treating it’s energy resources. Do they take steps in saving Energy? location of the unit must be in industrial area and should not harm Environment.
- S- Society ; well here you can easily refer to CSR report, which every company have to put in their annual report!
- G- How well they govern their company in relation to stakeholders ?
At last you have to question yourself Are You a Values-Based Investor?
if not think about it and if yes, go ahead and share your investing strategy in comments.
Thank you.
~Rashida
