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What Is ESG Investing?

Views 13462022.03.02

Key takeaways

  • ESG stands for environmental, social and governance, which are the three criteria for evaluating a company's sustainability performance.

  • ESG investing is increasingly gaining in popularity, and global sustainability has become more prominent and important than ever.

  • ESG investing pays attention to financial returns and efforts for a better society and the world.

Understanding ESG investing

Global sustainability has suffered huge challenges from the food crisis, energy crunch, rising sea levels, and much more. Sustainable development becomes more important than ever that investors start to reevaluate their traditional investment methods.

What do renewable energy use, plant-based milk, employee benefits, company board diversity, and CEO independence have in common? They are all aspects of ESG investing.

ESG investing, sometimes called sustainable investing, is an investment method that combines investment returns with concerns for the planet and world we live in. ESG investing is gaining in popularity in recent years, and many fund companies have issued related products.

Three criteria

Let's start with the ESG acronym itself. ESG stands for environmental, social and governance, which are three criteria to evaluate a company’s sustainability performance.

  • E is for environmental. This criterion is used to evaluate a company’s environmental protection effort. When worries about the climate, pollution, energy crisis are imminent, environmental protection has become a key topic in the era of clean energy.

  • S is for social. This standard is applied to measure a company’s business relationships with its employees, customers, partners and the community. This aspect is becoming increasingly important because the gig economy also draws more attention, that is, Uber and Lyft drivers’ consistent protest against poor pay and conditions.

  • G is for governance. Corporate governance usually involves board independence, leadership effectiveness, business ethics and transparency. This part comes down to the company's operations.

Example

Apple claims to be a company dedicated to ESG. Tim Cook, Apple’s CEO, once said "We believe that business, at its best, serves the public good, empowers people around the world, and binds us together as never before."

Their advocacy has been confirmed in a media event in September 2021. Greg Joswiak, Apple's senior vice president of Worldwide Marketing, noted that Apple has redesigned the packaging for the iPhone 13 lineup to eliminate the traditional outer plastic wrap on the box, a change that will avoid creating 600 metric tons of plastic waste. 

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The company's efforts can be found in Apple's ESG Report. Generally speaking, when a company initiates its ESG plan, it outlines measurable goals and progress, which can be announced in its regular reports.

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The content in this article is intended for general circulation and informational purposes only. It does not take into account the investment objectives, financial situation or needs of any particular person and should not be relied on as advice or recommendation. Information provided in this article are not specifically intended for or specially targeted at the public in any specific jurisdiction. Neither Moomoo Inc. nor its affiliates are licensed Financial Advisers and do not provide financial advice. You are advised to consult your financial adviser before making any commitment to invest in any capital markets product. The information published is not and does not constitute or form part of any offer, invitation or solicitation to subscribe or to enter into any transaction in capital markets products. Moomoo is a professional trading app offered by Moomoo Inc. In the U.S., investment products and services on Moomoo are offered by Futu Inc., Member FINRA/SIPC. In Singapore investment products and services are offered through Futu Singapore Pte. Ltd., regulated by the Monetary Authority of Singapore (MAS). This advertisement has not been reviewed by the MAS. Moomoo Inc., Futu Inc. and Futu Singapore Pte. Ltd are affiliated companies. Any illustrations, scenarios, or specific securities referenced herein are strictly for illustrative purposes. Past investment performance does not guarantee future results. Investing involves risk and the potential to lose principal.

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