First, it is so hard now even before the pandemic to avoid the issues of human rights violation, climate change, corporate abuse, and much more. Sometimes even donating to organizations it is hard to feel those impacts. It causes us to feel crushed by all the problems happening around us and ignore them altogether. But have you taken a deeper look into your investment portfolio? You might ask yourself, is my money-making things better or worse? How can I only donate, but help myself and others in a sustainable way?
Of course, our intentions for investing are obviously to grow our money’s worth for the long or the short term, but on the flip side, the cost of the profits for the company might be quite damaging to not only us but to others. Although you are using your money for good intentions does the thing you are investing in believe in the same morals and principles as you are? Do you continue to take part in this system pretending nothing is happening or is there a better way to make your investments have an impact?
To start a group called E.S.G. (Environmental Social Governance) created a test to help an investor decide whether it is worth morally investing in. The E focuses on many different factors like natural resource usage, pollution, and sustainability intuitively. Companies who make a positive step toward reducing waste would potentially receive higher points. The S refers to corporate behaviour that impacts the public. For example, if company A decides to stop selling ammunition while gun violence is high, customers are more likely to shop there afterwards. The G is a measure of the ethics and transparency of the company’s leaders. If there are big scandals breaking the headlines for a company it would potentially hurt their G score. Rather than a company just being good or bad, the groups give a score depending on the E.S.G. scoring system. The higher it is the better it is for society, the planet, and your wallet, and vice versa.
E.S.G.s does not only rate companies, but also ETFs, mutual funds, individual businesses, and more. Companies and investment companies are not only noticing that it is important to deliver financial performance but also show how they are making a positive impact on this planet. There may be many other tests you find online rating a company but taking the time to compare scores from different agencies, it helps you understand how your investments help or hurt overall. Focusing on a good ESG is good for the business long term but they are expensive compared to their other competitors. So will you take a blind eye or make an impact by more than just donating money?
Lucas Zhang was a Finance major at Ohio State University. He writes about finance, mortgages, and technology for Irish Mortgage Brokers.
Relevant Links: What is ESG?, Terms related to ESG