What is ESG investing?

ESG stands for environmental, social, and governance. Terms like ESG, responsible investing, and sustainable investing are often mentioned interchangeably—they all describe the use of ESG criteria to make investment decisions. ESG criteria measure the commitment that companies have to doing business in an environmentally conscious and socially responsible manner, while upholding a high level of corporate governance integrity. The goal of ESG investing is to identify and manage environmental, social, and governance-related risks that could disrupt a portfolio company's ability to consistently deliver strong returns to their shareholders.

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What are the categories of ESG investing?

Some investors prefer to incorporate ESG criteria into their investment decisions to reach both personal and financial goals. No matter your ESG goals, here are some factors for each ESG pillar that you can consider for your portfolio:

Environmental investing

The focus here is the impact a company's operations (manufacturing, supply chain, etc.) has on things like climate change and carbon emissions, air and water quality, land management, energy efficiency, and waste management.

Socially responsible investing

Investors who want to choose socially responsible investing look at how a company advocates for and addresses issues like workforce diversity, employee engagement, community relations, human rights, and labor standards.

Governance investing

This looks at how a company's board and management drive positive change for factors that can include the structure of the audit committee, diversity of leadership, executive compensation, relationship with shareholders, and lobbying or political activities.

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How ESG impacts a company's bottom line

In today's competitive environment, companies that take ESG considerations into account can better position themselves to make a positive impact on their bottom line by:

Increasing revenues

  • Identifying new markets or growing market share within existing ones
  • Maintaining strong labor relations that can increase employee motivation, productivity, and attract and retain new talent

Reducing costs

  • Reducing natural resource consumption in the production processes
  • Borrowing capital at lower costs as ESG-related risks are addressed and mitigated

Managing risks

  • Decreasing a company's exposure to regulatory and legal actions
  • Reducing the possibility of heightened social pressure from investors and activists

What are ESG funds?

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ESG mutual funds group shares of publicly-traded companies that adhere to environmental, social, and corporate governance principles. They can be a great way to add diversity to your portfolio and have investments that reflect your values.

We offer many ESG investing options, each strives to create positive, risk-adjusted, long-term outcomes. Our ESG managed advisory portfolios incorporate third-party ESG principles into our time-tested, disciplined approach to investing. Starting with our capital market assumptions, we integrate ESG principles into our asset allocation models to create diversified investment portfolios that include mutual funds, ETFs, and individual securities to help advance your ESG goals.

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