ESG investing, also known as sustainable investing or socially responsible investing (SRI), is an investment strategy that takes into account a company’s environmental, social, and governance (ESG) factors alongside financial metrics when making investment decisions.
ESG investing considers factors such as a company’s impact on climate change, energy efficiency, natural resource conservation, labor practices, human rights, diversity and inclusion, and board independence, among others. Investors who employ ESG investing believe that companies with strong ESG practices are better equipped to manage risk and generate long-term value for their shareholders.
ESG investing has gained popularity in recent years as investors become more aware of the impact that their investments can have on the world and demand more accountability from companies. Many investment firms now offer ESG investment options, and there are also specialized ESG indices and ratings systems that help investors evaluate companies based on their ESG practices.