What is ESG Investing and how does it work?
Special Report

Socially Responsible and ESG Investing the Adviser Investments Way

February 26, 2019
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Socially Responsible Investing (SRI)—aligning a portfolio with one’s values—has been practiced for decades, but has burst into the mainstream more recently under the moniker: “ESG,” or Environmental, Social and Governance investments.

At its core, ESG investing distinguishes between companies that score well on a host of issues related to environmental, social and corporate governance criteria, and those that don’t. Investors pursuing ESG strategies may favor companies that provide services and products they believe achieve social good, while avoiding companies they perceive to be detrimental to society. For instance, alcohol, tobacco, gambling and weapons companies are often omitted from ESG portfolios.

As you might expect, there are many measures used to determine how well companies score on an ESG scale. Some ESG strategies are geared toward being consistent with religious beliefs, while others may focus on niche industries such as renewable energy, or companies with low carbon footprints. Whatever the criteria used to build an SRI or ESG portfolio, the goal is one and the same: To do well while doing good.

Translated into investment language, this means earning a reasonable return while investing in companies that help improve the world in which we live.

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