Why Is ESG Investing Popular
Key Takeaways
• ESG stands for environmental, social, and governance, which are the three criteria for evaluating a company's sustainability performance.
• ESG investing is gaining in popularity as global sustainability has become more prominent and important than ever.
• ESG investing is about influencing positive changes in society by being a better investor.
Global sustainability has suffered huge challenges from the food crisis, energy crunch, rising sea levels, and much more. Sustainable development has become more important than ever, and therefore it may influence investors to reevaluate their traditional investment methods.
What do renewable energy use, plant-based milk, employee benefits, company board diversity, and CEO independence have in common? They are all aspects of ESG investing.
ESG investing, sometimes called sustainable investing, is an investment method that focuses on non-financial investment returns that have a direct effect on the world we live in. ESG investing is gaining in popularity in recent years, and many fund companies have issued related products.
Three criteria
Let's start with the ESG acronym itself. ESG stands for environmental, social and governance, which are three criteria to evaluate a company’s sustainability performance.
• E is for environmental. This criterion is used to evaluate a company’s environmental protection efforts. When worries about the climate, pollution, and energy crisis are imminent, environmental protection has become a key topic in the era of clean energy.
• S is for social. This standard is applied to measure a company’s business relationships with its employees, customers, partners, and the community. This aspect is becoming increasingly important because the gig economy also draws more attention, that is Uber and Lyft drivers’ consistent protest against poor pay and conditions.
• G is for governance. Corporate governance usually involves board independence, leadership effectiveness, business ethics, and transparency. This part comes down to the company's operations.
Example
Apple claims to be a company dedicated to ESG. Tim Cook, Apple's CEO, once said "We believe that business, at its best, serves the public good, empowers people around the world, and binds us together as never before."
Their advocacy was confirmed in a media event in September 2021. Greg Joswiak, Apple's senior vice president of Worldwide Marketing, noted that Apple has redesigned the packaging for the iPhone 13 lineup to eliminate the traditional outer plastic wrap on the box, a change that will avoid creating 600 metric tons of plastic waste.
The company's efforts can be found in Apple's ESG Report. Generally speaking, when a company initiates its ESG plan, it outlines measurable goals and progress, which can be announced in its regular reports.