ESG: What Does the Future of Investing Look Like?
Ari Zoldan | Jun 22, 2021 11:59AM ET
A trend has the investment community buzzing with excitement, with talk about it reimagining how investors evaluate positions: ESG. But what is ESG? Is it a marketing gimmick? Or a fundamentally based investment strategy? Moreover, is ESG something that an average investor should take notice of and incorporate into their portfolios for the long term?
Here, we will discuss the development of ESG, its current outlook, including the challenges it must overcome and the potential opportunities it presents.
The Three Components of ESG. Source: 18% annualized return. Whether or not this outperformance will continue, though, is anyone’s guess.
Empowering investors to invest while honoring their values without sacrificing returns is what ESG is all about. It has taken off in recent years and seems destined only to gain more and more widespread adoption. ESG faces many challenges and skeptics. To successfully take on these impediments ESG methodology standards must become more transparent and formalized. After all, the whole point of ESG investing is to allow investors to control where their money goes, and guide it to companies that provide unique opportunities and align with ESG values. Funds that bill themselves as ESG friendly must be able to ensure that the companies they invest in truly uphold the values they profess. I expect the ESG revolution to accelerate to even greater heights over the coming years. The future will be a more green, equitable and transparent one, and ESG is simply allowing investors to embrace this reality.
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