Environmental
Social
Governance
Hey guys! Today’s post is for my environmentally-conscious investors. It isn’t often that people connect the stock market to the environment, but just 100 large companies are responsible for 71% of global emissions. I’m going to show you a way we can more mindfully invest our money, and no longer facilitate the increasing number of carbon emissions in our atmosphere.
Typically, before investing in a company, we look at the following:
– the current share price relative to its per-share earnings
– the company’s beta to see how much risk is involved with a stock compared to the rest of the market
– which stocks have a high dividend
– cues from charts like the stock’s price movement
Although we can utilize the above factors to decide which companies to invest in, there is another set of non-financial performance indicators, known as the Environmental Social Governance factors (ESG). ESG includes ethical, sustainable, and corporate governmental issues, such as making sure there are accountability ensuring systems in place, and managing a corporation’s carbon footprint. The chart above more specifically describes ESG’s three central factors. We are going to be diving into the Environmental factor.
‘E’ in ESG assesses how a company performs as a stewardess of nature. It analyzes how the company’s efforts affect the environment and manage environmental risks. Topics studied vary from natural resources preservation, animal treatment, to greenhouse gas emissions.
Financially, investing in companies with high ESG ratings is beneficial, because they are less risky. Unlike financial factors, this shows that the company is better positioned for the long run, and prepared for uncertainty.
Environmentally, the ESG framework is a mechanism that will ensure the implementation of a more sustainable economy. Looking at the doubling numbers, investors are starting to implement ESG factors into their investments, creating awareness that companies must manage their environmental impact in innovative ways in order to remain successful. This pressure is actually benefiting the environment.
So the next time you are about to make an investment, think further than financial factors, and be an environmentally conscious investor.
Written By Anika Arora
Great Job Anika and Divya!!