Summary
- Responsible investing means evaluating Environmental, Social, and Governance (ESG) factors to gauge business performance, risk, and opportunities.
- Investments not only impact our individual financial security. Each investment decision has implications that go beyond the short-term financial performance of a single stock or security.
- Responsible investing can help promote decarbonization, increased investments into communities of color, and stricter scrutiny of labor and manufacturing practices.
What is responsible investing?
Responsible investing – sometimes called sustainable investing – is an investment strategy that considers Environmental, Social, and Governance factors to help businesses and investors assess risks and opportunities on a range of issues. Learn more about ESG here.
Responsible investing goes far beyond investments in “ESG funds.” Responsible investing seeks to maximize sustainable value creation over the long-term and minimize risks from climate change, extreme economic inequality, racial inequity, poor governance, and more. Responsible investing can include stopping investing in corporations that are overly focused on short-term returns and risky bets without taking into account environmental, social, and governance issues, and/or pushing corporations to meaningfully address these issues.
Responsible businesses that want to reduce risk and create value over the long term may seek to reduce carbon emissions, water consumption, or plastics use as part of their Environmental strategy. For their Social strategy, they could improve working conditions through fairer pay, investments in racial equity, and better oversight of human rights in their supply chains. Businesses seeking to model good governance may ensure that the leadership of a company avoids conflicts of interest, that their lobbying expenditures line up with their stated values, and they are accountable for their actions.
Last modified: November 30, 2023
