A Guide To Being a Socially Conscious Investor

Caroline Miller, Tom Brown |

Did you know that there are different strategies you can use to invest in ethically sound companies that you believe in? As we turn our attention to the greater good, your investments can actually be used for companies that prioritize and fund environmental policies, sustainability and even diversity in the workforce.

Environmental, social and governance (ESG) is an investing method that measures the sustainability and societal impacts of an investment in a particular business or company. The environmental component concentrates on a company’s positive and negative impacts on the earth such as climate change policies, water-related issues, usage of renewable energy, and more. The social aspect consists of people-related elements such as issues that impact customers, consumers, employees, and suppliers. Lastly, the governance component relates to the company oversight and board of directors. This includes how the business is run and how the board couples with different stakeholders. ESG criteria are becoming a popular way for investors to evaluate companies before making an investment.

As ESG issues have become one of the top concerns for investors, many companies have taken a proactive approach to ESG policies and have adapted to these changing socio-economic and environmental conditions. Today, some of the best ESG companies are Microsoft, Equinix, PepsiCo, and Prologis. Additionally, many technology companies in Silicon Valley prioritize ESG issues as do their stockholders.  These companies are examples of some of the top ranked ESG companies because they have increasingly prioritized climate change, social issues, a healthy work environment and powering global trust and responsibility.
ESG factors cover a wide variety of issues that have the potential to impact a company’s reputation. As these environmental, social and governance issues become more popular, the public will expect companies and boards to focus on ESG issues. The main ESG trends to currently watch are impact of climate change, water management and corporate governance. Climate change has become a dominant theme as more climate-related regulations have been introduced and a shift from a Trump to Biden administration may accelerate the impacts. Many companies and businesses will look for new business opportunities and position themselves as climate leaders.

Water management will also be a trend because while the global water demand is increasing, companies are expected to protect water resources, prevent pollution and reduce their consumption through modern water management policies. Increasingly, businesses and their directors are held responsible for corporate practices that take care of the earth and its citizens. Many companies, especially traditional energy, struggle to prioritize environmental issues while still achieving earnings targets and meeting the expectations of the majority of the companies’ investors.  It is important that a company treats its employees right, operates ethically, avoids risks that could affect their reputation, and earns revenue through sustainable practices. Good governance qualities are accountability, transparency, legitimacy, public participation, and efficiency. It is important that businesses and companies follow the current ESG trends so they can stay aligned with the current issues.

If you are interested in learning more about ESG strategies and how your investments can make a social impact, our team at Blue Water Capital Management is here to guide you. Contact us today!