In recent times more and more companies are approaching the concept of sustainability.
This is an issue that is very much on everyone’s mind, affecting human activity in several, mutually nonexclusive aspects. The acronym ESG denotes those investments that are socially responsible.
Thus sustainable from the point of view of the environment, society, and corporate governance.
How to choose socially responsible investments
If an investor opts for socially responsible investments, how is it possible to find speculations which follow these criteria? Indeed, it is quite simple as the acronym ESG properly denotes speculations that offer interesting indices from the perspective of sustainability.
In essence, it is not difficult to prepare a socially responsible portfolio, because wealth management companies already make it easy for investors to understand these kinds of characteristics.
Lists of funds, stocks, and other financial instruments with excellent ESG indexes can then be found online. If desired, then the investor can understand which mutual funds are socially responsible by checking their investment policies.
In fact, remember that this kind of data is always published by those who manage a fund, partly because these are important criteria for distinguishing and characterizing a financial product.
What is the meaning of “socially responsible funds”
Let’s take a step back to the meaning of the acronym ESG because it provides a thorough understanding of what a socially responsible fund is.
“E” stands for environment, an environmentally conscious fund that invests exclusively in businesses that limit the production of greenhouse gases, which have a minimal environmental impact.
Both in terms of their direct operations and in terms of what they buy in raw materials, products, and services from outside suppliers.
Environmentally conscious enterprises seek to reduce the use of fossil fuels, and wastewater, and avoid significant air and water pollution.
“S” stands for social, a socially conscious enterprise that pays fair wages seeks to develop the community in which it is located to the best of its ability, and offers fair labor contracts to all employees.
Lastly, “G” stands for governance, as socially responsible funds invest in companies and corporations that do not have problems from the point of view of corruption, and government funding, and are not involved in any kind of fiscal or similar issues.
Why choose ESG funds
The choice of ESG funds is primarily ethical, made by those who think about the future of the society in which they live and the entire planet. So, it is not necessarily about funds that offer a high return or a very low-risk threshold.
These two criteria must be considered separately when deciding to favor one fund over another. It should therefore be made clear that those who prefer ESG funds will still have to assess the threshold of risk they consider acceptable and may still face losses.
This is a vision that goes beyond the potential gains that lie in an investment. It is true, however, that the thrust of many toward ESG funds is providing many investors with attractive returns from an economic point of view.
However, it is not possible to make predictions for the future.
Is this vision enjoying success
Some research has shown that indeed the growing interest in socially responsible funds is slowly changing the business world.
On the one hand, an increasing number of investors are showing particular interest in this kind of product, which obviously pushes wealth management companies to prefer investments within ethically responsible companies.
In addition to this, it has been noted that companies with better ESG indexes have over the years achieved better performance in world markets. For this to profoundly change the society we live in in the future will surely have to wait many years.