ESG investing

Hey there, future finance moguls! Have you been hearing a lot about ESG investing and wondering what it’s all about?

Well, strap in, because we’re about to embark on an exciting journey through the world of Environmental, Social, and Governance (ESG) investing. 🙏🏼 We’ll explore what ESG investing is, dive deeper into the E, S and G factors and discuss how to structure your own ESG portfolio.

Let’s get started!

A little trip down memory lane

Before we delve into what ESG investing is all about, let’s take a little trip back in time. ESG investing is not a new kid on the block; it’s been around since the 1960s and 70s.

The concept started gaining traction during the anti-apartheid movement in South Africa 🇿🇦, when investors around the globe started pulling their money out of companies doing business there. This act, often referred to as ‘ethical investing’, was the spark that lit the ESG flame.

Fast forward to today, and ESG investing has evolved from a niche investment strategy to mainstream stardom. ✨

In fact, according to the Global Sustainable Investment Alliance, ESG investments ballooned to over $35 trillion in 2020, up a whopping 15% from 2018.

Now, that’s what we call a growth story!

So, what is ESG investing?

Put simply, ESG investing is about investing your money in companies that aren’t just focused on making profits but also making a positive impact on the world. 🌍

Think of the ‘E’ in ESG as the guardian of the environment. 🌱 It looks at how a company’s operations affect Mother Earth, including their approach to climate change, pollution, and resource management.

For instance, Tesla, the electric vehicle behemoth, is a stellar example of a company scoring high on the ‘E’. By focusing on electric vehicles, Tesla is helping to reduce carbon emissions and pave the way for a cleaner, greener future.

Next up, the ‘S’, or social factor, examines how companies treat their employees, suppliers, customers, and the communities they operate in. When company is fair to its workers, supports local communities, and values its customers, that’s the ‘S’ sweet spot!

Finally, the ‘G’ stands for governance. This involves assessing a company’s leadership structure, executive pay, audits, and shareholder rights. In other words, it’s all about how the company is run.

A well-governed company tends to have more sustainable long-term performance. Remember the Volkswagen emission scandal? 🏭 That’s a classic example of poor governance.

Why does ESG investing matter?

Now, you may be wondering why ESG investing is such a big deal. Well, it’s simple. It lets us invest our money in a way that aligns with our values. It’s no secret that Millennials and GenZers are passionate about making a positive impact on the world.

And guess what? ESG investing allows us to do just that, while also aiming to grow our wealth.

Besides, ESG investing is more than just doing good; it’s about risk management too. Companies that ignore ESG factors could face reputational damage, regulatory fines, and lawsuits, which could all take a toll on their bottom line (and our pockets!). 💸

A fascinating example here is BP’s Deepwater Horizon oil spill in 2010. Following the disaster, BP’s share price plummeted by 55% in just 50 days. Ouch!

The rise and popularity of ESG investing

ESG investing has been riding a wave of popularity, especially among younger generations.

According to a 2020 survey by Morgan Stanley, 95% of millennials are interested in sustainable investing. This enthusiasm is not only shaping investment trends but also prompting companies to take ESG factors more seriously.

With the growing awareness about climate change, social inequality, and corporate transparency, ESG investing is gaining momentum like never before. It’s not just a fad, folks. It’s a new way of investing, aligning our financial goals with the future we want to live in.

 

The ESG journey begins…

So, are you ready to begin your ESG investing journey? Remember, it’s about more than just looking to make money. It’s about making a difference, one investment at a time. In the following chapter, we dive deeper into the three factors, environmental, social and governance.

Just keep going! 💪🏼. Remember, with all investing, your capital is at risk.