The Best Way To Invest With ESG In Mind

More funds are looking for companies that pay attention to environmental, social and corporate governance factors.

- Nellie S. Huang​​​​​​

Socially conscious investing has gone mainstream. Many people now factor environmental, social and corporate governance criteria—the triumvirate that define so-called sustainable investing—into their portfolio decisions. And they’re not all millennial tree huggers. // Schroders, a worldwide investment firm, reports that over the past five years, 70% of U.S. investors have increased their allocation to ESG investments. Some have deep pockets. In 2018, 43% of U.S. institutional investors— endowments, foundations and pension plans—incorporated ESG factors into their decision-making process, nearly twice the percentage in 2013. Part of the reason: A growing body of evidence shows that investors don’t have to give up returns to invest sustainably. // Naturally, investment firms are answering the call with new products. More than 170 sustainable investing funds have debuted over the past five years, along with apps that promise to align your portfolio and your values. In June, for example, Newday Investing launched an app through which investors can access proprietary stock portfolios tailored to six themes, including climate change and gender equality. “Every type of investor, from the largest pension funds to individual investors, is expressing significant interest in responsible investing,” says John Streur, head of Calvert Research and Management, one of the oldest sustainable investing firms in the country.

You don’t have to be a climate-change zealot or burn with desire to save the world to benefit from this approach. Many ESG tenets make good business sense and, therefore, good investment sense. We’ll tell you what the ESG characteristics are all about and why some make a difference in company performance, as well as the best way to invest with ESG in mind.

A LONG EVOLUTION