What is ESG investing?

By Lavall Chichester

The short answer? Portfolios with a purpose. ESG investing refers to three central factors in measuring the sustainability and societal impact of an investment:

  • Environmental
  • Social
  • Governance

Welcome to “responsible investing,” also known as “sustainable investing.” 85% of CFA Institute members take ESG factors into consideration in their investing. Other key ESG components include:

  • Global health and safety
  • Local communities 
  • Infrastrastructure practices 

An increasing number of companies are making disclosures of ESG activity in an annual or standalone sustainability report.

EnvironmentalSocialCorporate Governance:
The conservation of the natural worldThe consideration of people and relationshipsThe general standards for running a company
Climate change 
Air and water pollution
Energy efficiency 
Deforestation
Customer satisfaction
Gender equality
Human rights
Labor standards
Data protection and privacy
Employee  engagement
Board composition
Bribery and corruption
Political contributions
Lobbying
Financial audits

Why is ESG investing important?

Research shows that stocks of sustainable companies tend to significantly outperform less sustainable counterparts. This means investors who integrate ESG concepts into their portfolio can improve returns. Here are some potential long-term financial benefits for companies who pursue a high ESG performance rating:

  • Adaptability: An ever-evolving business model could minimize the impact of disruption from technology or regulation in the market. 
  • Prepared for regulation for the win: A company that invests in renewable energy infrastructure and technology to reduce carbon emissions may be prepared for rising environmental tax or other payments for offsetting carbon emissions.
  • More attractive to investors: Green investment funds and socially responsible investors are increasingly more likely to fund companies with a great ESG score.

Check out the benefits for investors who layer ESG into their own personal portfolio:

  • Positive portfolio image: Investors who invest in socially conscious companies may experience better results and generally more positive portfolio recognition among other investors on the market.

Adaptability: ESG portfolios are less likely to be disrupted by technology or regulation changes in the market.

How does ESG investing work with MoneyLion?

Invest in yourself and in a better world with a MoneyLion Investment account. Our Greater Good portfolio theme is an easy way to access investments that meet certain standards aimed at improving society and the environment — while offering the opportunity for growing your portfolio.

It takes a moderate approach to risk, investing in low-cost, broad-based stock and bond ETFs (exchange traded funds), that provide exposure to companies across US and international markets and offer light exposure to emerging markets. All ETFs in the Greater Good portfolio meet strict ESG standards and guidelines. 

It’s a great way for investors to not only invest in responsible and sustainable companies but to diversify their portfolios in a way that might improve their returns and lower their risk over time. As ESG becomes more popular, it’s likely an increasing number of companies and funds will cater to these principles.Interested in investing in yourself and a better world? Download the MoneyLion app and check out our fully managed portfolio. It’s personalized to your needs with no minimums or asset-based management fees. And you can add the Greater Good portfolio and others (Earn & Grow and Future Innovations) to customize your portfolio even more. Learn more about how investing at MoneyLion works.

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[Disclosure]
Investment advisory services provided by ML Wealth LLC. Investment Accounts Are Not FDIC Insured • No Bank Guarantee • Investments May Lose Value. For important information and disclaimers relating to the MoneyLion Investment Account, see Investment Account FAQs and FORM ADV. Accounts are subject to an administrative fee of $1 per month.

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