In recent years, Environmental, Social, and Governance (ESG) criteria have gained significant traction among investors seeking to align their financial goals with broader societal and ethical considerations. ESG mutual funds have emerged as a prominent vehicle for individuals and institutions alike to invest with purpose, integrating sustainability and ethical principles into their investment strategies.
Understanding ESG Criteria
Environmental criteria evaluate how a company performs as a steward of nature. This includes its impact on climate change, resource use, pollution, and conservation efforts. ESG funds typically favour companies with strong environmental practices, such as those reducing carbon emissions, promoting renewable energy sources, and implementing sustainable supply chain practices.
Social criteria assess a company’s relationships with its employees, suppliers, customers, and communities. This includes factors such as labour standards, diversity and inclusion policies, community involvement, and customer satisfaction. ESG mutual funds seek to invest in companies that prioritise social responsibility, foster inclusive workplaces, and contribute positively to society.
Governance criteria examine the quality of a company’s leadership, executive pay, shareholder rights, and internal controls. ESG funds prioritise companies with transparent governance structures, independent boards of directors, ethical business practices, and effective risk management frameworks. Strong governance helps mitigate risks and ensures accountability … Read the rest