ESG investing stands for Environmental, Social, and Governance investing. It is an investment approach that takes into account the environmental, social, and governance factors of a company when making investment decisions.
Environmental factors include a company’s impact on the environment, such as its carbon emissions, resource usage, and waste management. Social factors include a company’s relationships with its employees, customers, and communities, as well as its impact on human rights and labor practices. Governance factors include a company’s management structure, board diversity, executive compensation, and shareholder rights.
ESG investing seeks to balance financial returns with social and environmental responsibility. It aims to invest in companies that are sustainable and ethical, and avoid investing in companies that have a negative impact on society and the environment.
ESG investing has gained popularity in recent years as more investors recognize the importance of considering non-financial factors when making investment decisions. It is also seen as a way to influence companies to adopt more responsible practices, as investors can use their investments as a way to pressure companies to improve their ESG performance.
Characteristics of ESG Exchange Traded Funds (ETFs)
ETFs in the ESG space are careful about screening out companies that don’t score well for the 3 main pillars of ESG Companies. The ETHO Climate Leadership US ETF (ETHO), for example, screens out any companies associated with fossil fuels, tobacco, weapons and gambling companies, according to a report in US News and World Report.
ETHO Daily Chart (Tradingview)
Other ESG ETFs mirror the same performance of ETHO, Some of them include:
- VanEck HIP Sustainable Muni ETF (SMI)
- AXS Change Finance ESG ETF (CHGX)
- Nia Impact Solutions Fund (NIAGX)
- Democracy International Fund (DMCY)
- AXS Green Alpha ETF (NXTE)
Before you consider investing in any ETF, make sure to thoroughly research the fund’s mission and performance.
We will continue to keep an eye on the ESG sector in future reports.