ESG Investing: What Is Most Important?

ESG Investing has been around for many years. Today, there are more investors that are looking to take the ethical route. In the days where environmental and social impacts of how a company is being looked constantly under a microscope, investors are paying attention.

They are investors that are not only looking to invest in long-term portfolio growth, but they are investing based on what they truly believe in. This is proof that not every investor will be in it for the money.  But they place value in the company by investing in stock and perhaps providing some kind of influence as a shareholder.

We’ll be talking about what is most important when it comes to ESG investing. This includes what you want to look for in a company before even making a decision to invest. Let’s take a look now at the things that are most important when it comes to ESG investing.

ESG Reporting

One of the key elements to ESG investing is a company’s ESG reporting. This is a report that focuses on the environmental, social, and governance areas of a company. You want to look for high ratings in these areas, as they can be favorable for ethical investors.

For example, if you are someone who is environmentally conscious, a high environmental rating is what you are looking for. If the company has proven itself to make a positive impact on the environment, then that could be a green flag.

Another example is that you can be passionate about social causes. A company that is proven to be diverse and provides equal treatment for its employees including women, maybe a company worth investing in.

Looking at ESG reports will be a must for those performing their due diligence. Especially when someone wants to make smart decisions in terms of what to include in their investment portfolio. The more ethical a company is to investors that match the latter’s views in beliefs, the better chance they will be favored.

Companies lacking ESG reports or having poor ratings will be passed up by ethical investors. A lack of transparency has always been frowned upon. An investor would be smart enough not to trust a company that isn’t as transparent as it should be.

Transparency and Integrity

As mentioned before, a company’s transparency and integrity are often considered by investors. Especially those who are ethical. No investor would want to be ‘guilty by association’ for investing in a company that tries to cover its tracks every single time.

While you won’t face criminal charges for a company’s wrongdoing, investing in a company may just be enabling it. It’s important for you to consider what is considered the right thing for a company to do before considering dropping one dollar on a stock. The more transparent and high integrity they are, the more you can trust them.

Transparency and integrity are just a couple of blocks that make a company ethical. Being honest and letting people know what your business is doing to benefit the community will bring positivity. However, a company could play on the emotions of those investors by saying one thing and doing another.

That’s why doing your due diligence and paying close attention to ESG reports should be something worth doing. Taking someone’s words at face value could hurt your chances of growing your portfolio.

Your Decision To Invest Or Not To Invest

At the end of the day, your decision to invest solely rests on whether or not a company matches the same beliefs that you do. Keep in mind that not everyone has the same beliefs and ethics that you do. You could not invest in a company because it goes against your religious beliefs.

Likewise, you can choose not to invest in a company because of allegations of poor working conditions. Your decision can also be influenced by those who are like-minded and are interested in investing as well. While it may not move the needle much, drawing more people to invest in a certain stock could increase its value a bit.

The more investors that are attracted to a stock, the more valuable it becomes. This is basic investing 101. It goes the same way for ethical investing as well.

Final Thoughts

There are a few things that are most important to ESG investing. Knowing what stocks to invest in is one thing. But the way they handle business and do things behind the scenes is another. They will do their best to provide honest valuable data in their ESG reports.

When looking at companies of interest, it’s important to determine whether or not they are the real deal. If they look like they are saying one thing and doing another, it may not be worth investing in it.