Should you be considering the ESG criteria when investing in companies? If you aren’t already, you might want to start. Companies focused on sustainability may not be at the top of the corporate food chain at the moment, but—thanks in part to how fast consumer bias can change with the post of a Tweet—investors need to be taking a serious look at the environmental, social, and governance (ESG) criteria of their investments.
When the ESG Criteria isn’t met…
How green are your investments? Do they have gender equality policies? How well are they managed? This is the essence of a company’s ESG criteria. It’s also the basis of several social movements, pushing companies into transparency and environmental responsibility.
Consider the Nike debacle in the 1990s, when the clothing giant suffered public backlash for using sweatshops. In 2015, German car manufacturer Volkswagon was slammed for cheating on nitrous oxide (NOx) emissions tests and incorrectly reporting CO2 emissions. With annual reports from Greenpeace and websites like GoodOnYou.eco, environmental transparency is less of a “volunteer” and more of a “voluntold” thing.
Stepping away from the environmental aspects of ESG, the increasingly wild swings on the issues of gender equality effect company stocks, stakeholders, and employee morale. The issues of gender equality, walking hand-in-hand with sexual harassment scandals, the #MeToo and #HimToo movements, equal pay and diversity policies further shake the corporate world.
The list of companies with poor governance is astronomical, although some understandably hit the featured section of the news before others. USA Today posted a Top 20 Most Hated Companies list in February 2018, in which top players such as the NFL, Fox Entertainment Group, Equifax, and Foxconn Technology Group are listed, among others.
Building a future-focused investment portfolio as an ESG investor
The signs are clear; as a world, we’re marching towards a cultural demand of accountability in corporate affairs. Consider the amount of information pouring into the Internet about companies—real or imagined. Companies that prepare for misinformation by pushing towards more sustainable practices are becoming the better investment.
The fact is, as investors, we have to look towards the future possibilities of sustainable energies, investing in those companies that push for cleantech. Companies that fail the ESG criteria will eventually fail all together under government and public scrutiny. Becoming an ESG investor ensures your investments will survive the fallout.