Why ESG Investing is About More Than Feeling Good
Values-based investing is ultimately up to the investor.
In the last few years there has been a focus on environmental, social, and governance issues when it comes to investing. Is this just because being conscious about ESG issues makes people feel good, or is there actually something more to it?
In equity research, we focus on the risks that could arise from ESG factors--generally, we find that these risks may not currently affect a company but have meaningful potential to. Building on this, we’d think of sustainable investing as appropriately taking into account ESG risks when making investment decisions. On the other hand, socially responsible investing, or SRI, considers personal preferences, avoiding industries that might not agree with one’s values.