Different Types of ESG Investments

How people’s actions and decisions impact society and the world around them has become increasingly important over the years. People are beginning to be more conscious of their impact on the world in all types of areas of their lives. Nowadays, many desire to integrate this consciousness into their investment decisions through ESG (Environmental, Social and Governance) investment strategies. 

There are various types of ESG investment assets available for you to choose from. 

ESG stocks 

Stocks are a common asset to include in most investment portfolios, including those looking to follow an ESG strategy. Many companies will provide investors with an impact report which can help you to better understand a company’s impact on ESG factors that you may be considering. The impact report commonly provides measures on carbon emissions as well as give you information on cultural and sustainability actions and initiatives the company has taken or plans to take in the future. 

You will also want to keep up-to-date on the companies you invest in to ensure their changes in governance and policies do not fall outside of your ESG qualifications. Having a financial professional help you manage your portfolio might be a good idea since it can be time-consuming to always be watching market news to keep up with the companies in your portfolio. 

ESG mutual funds 

Investing in mutual funds are good ways to gain diversity in your portfolio since you will be investing in a wide range of stocks, bonds, and other assets. However, you can also choose to invest in sustainability-focused mutual funds if you are looking to implement an ESG investing strategy. Be sure to take a look at the mutual fund prospectus to be sure that the fund manager’s strategy matches your ESG goals. Your financial advisor will be able to help you determine which mutual funds may match your sustainability goals. 

ESG exchange-traded funds 

You may also want to consider exchange-traded funds (ETFs) for your ESG portfolio. ETFs are pre-selected baskets of assets which you can control with a single market position instead of having to open numerous market positions individually. The selected group of assets for an ETF will aim to be representative of a particular sector, index, or geographical area. For example, an ETF may be based upon the S&P 500 index which means it would follow the price fluctuations of this particular stock index. 

There are also ETFs which are based upon ESG-qualified companies and assets. For instance, there are various ESG-based ETFs which have a basket of stocks and other assets which the ETF issuer has deemed to adhere to certain ESG metrics. You may also want to consider sector-based ETFs that fit ESG qualifications, such as an ETF representing the solar industry or electric car sector. 

Financial aspects 

Although sustainability might be your main goal you will still need to balance these goals with the financial aspects of your investments. There may be some assets which fit your ESG goals but are also more financially stable than the assets you currently have in your ESG portfolio. A knowledgeable financial professional may be able to help you enhance the financial gains of your portfolio while maintaining your sustainability objectives.

Incorporating sustainable investing criteria into the investment selection process may result in investment performance deviating from other investment strategies or broad market benchmarks.