ESG Investing
In short
Environmental, Social, Governance — responsible investing based on sustainability factors
ESG investing considers not just profits but how a company treats the environment, its employees, and whether it's run ethically. Some investors avoid tobacco, weapons, or companies with poor environmental records for personal or financial reasons.
ESG (Environmental, Social, Governance) investing integrates non-financial factors into investment decisions. It includes exclusionary screening (avoiding sin stocks), positive screening (best ESG in each sector), and impact investing (targeting specific outcomes). ESG performance is mixed — depends heavily on implementation.
Related concepts
- Value Investing — Value investors hunt for companies the market has mispriced — cheap relative to their true worth. Like finding a $100 bill selling for $70. The strategy requires patience: sometimes the market stays wrong for years.
- Passive Investing — Passive investing means buying index funds and holding them forever. No stock picking, no market timing. You get exactly what the market returns, minus tiny fees. Research consistently shows it beats most active strategies over the long run.
- Diversification — If you put all your money in one stock and it crashes, you lose everything. Spread it across 20 different stocks, sectors, and even countries — when one falls, others may rise, protecting your overall wealth.
- Active Investing — Active investing means trying to pick stocks or time the market to outperform the index. It requires research, analysis, and discipline. Most active managers fail to beat their benchmark after fees over 15 years.