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Investing in Environmental, Social, and Governance (ESG) platforms is a great way to maximize returns while making a positive impact on the world. by focusing on companies that prioritize sustainability, ethical working conditions, and responsible corporate governance. ESG investing has become increasingly popular in recent years, and as more and more investors recognize the importance of this type of investing, it’s becoming easier to find ESG platforms to invest in.
This is a preliminary introduction to ESG investing – from understanding what it is to learning about ESG ETFs as well as Robo-Advisors in this rapidly evolving investment area.
What is ESG Investing?
ESG refers to criteria for evaluating corporate behaviour. ESG evaluation is primarily a tool for helping make investment decisions by identifying the risks of ignoring ESG related risks as well as the rewards of recognizing them. The primary objective of ESG investing is financial returns. ESG investing is not to be confused with Socially Responsible Investing (SRI) or Impact Investing for which the objectives are different. One school of thought is that ESG investing is a first step for many – a positive compromise between solid financial returns and social responsibility. Individuals and corporations can choose to invest in companies that prioritize sustainability, ethical working conditions, and responsible corporate governance. To make this possible, ESG investing must demonstrate benefits versus non-discriminatory market based investment. The proof of this approach is well demonstrated in the graph from Statista above which shows the exponential increase in ESG ETF (exchange traded funds) investments over the last couple of years
Benefits of ESG Investing
There are numerous benefits to investing in ESG platforms, including:
- Higher Returns: One of the biggest benefits of ESG investing is the potential to earn higher returns. Such investments have historically produced robust returns.
- Making a Positive Impact: Another benefit of investing in an ESG platform is that you’re making a positive impact on the world. With each investment you make, you’re helping to change the world for the better.
- Lowering Risk: Another benefit of investing in ESG platforms is that ESG investments are usually considered to be lower risk investments. Of course, this will require lots of due diligence to ensure that you’re picking up the right assets to invest in
- Diversification: Another benefit of investing in ESG platforms is that it allows you to diversify your investments.
A sample of returns on some of the largest ETFs
A recent article from Motley Fool listed the ETFs below based on information from Yahoo Finance. The reported growth figures over a three-to-five year period are robust. mostly in the double digit percentage range.
Moving away from the large ESG ETFs, outstanding returns have been seen in specialized portfolios. For example, a portfolio which focuses on clean energy curated by a Singapore-based B2B Robo-Advisory fintech represented by Bridge DFS (www.bridgeto.us) returned 40+% p.a. over a 3 year period. If you represent a bank or a company in the area of wealth management please write to sanjiv@bridgeto.us for more information about this portfolio as well as the fintech behind such solid returns.
Beginning your ESG ETF investment journey
Choose the route that you find most convenient and efficient. You could directly visit the websites of the ETF Managers that have some of the larger ESG ETFs. Or use an offline or online brokerage to invest on your behalf. Alternatively, you could connect with your bank or non-bank wealth manager if you’d like less of a DIY approach as well as institutional advice and commentary. Whichever route you choose, due diligence on your part is key. In the last few years, specialist B2B Robo-Advisory firms have augmented the capabilities of wealth managers, enabling them to sift-and-sort through the ETFs available. If you represent a bank or a company in the area of wealth management and would like to know more about B2B Robo-Advisors, please write to sanjiv@bridgeto.us for more information.
Please keep a look out for more information on the ESG space from my blog.
Thanks, Sanjiv
I am a Founding Partner at BridgeDFS, a bespoke digital financial services advisory firm (www.bridgeto.us). Views expressed are my own. I can be contacted at sanjiv@bridgeto.us.
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