In an age where climate change, ethics, and changing social situations have become a daily ‘norm’, many investors have started to take a more considered approach to their investments.
ESG investing refers to investments that are undertaken with close consideration of environmental, social, and governance factors alongside financial factors when investment decisions are being made.
For example, when it comes to environmental factors you may be considering carbon emissions, gender and diversity for social factors, and board members’ diversity for governance factors.
Rising in the midst of post-pandemic life, this approach to investing has grown in importance and comes into play within a wide range of organisations.
What is ESG meaning?
If we want to change our world for the better, it’s important that all organisations and investors work together to make the planet a better place. This often involves putting your money to work in companies and initiatives that align with your own beliefs and ideas.
With ESG investing, investors will use independent ratings to help them evaluate a firm’s behaviour and policies toward environmental, social and governance issues.
If you’re adopting an ESG investing approach, you’ll be looking out for companies that score highly on the independent ratings as these are the companies that will be influencing positive change in the world.
Not only does using independent ratings to vet companies before investing your money mean that you can choose to invest in those who are closely aligned with your own beliefs, but it will also give you a more holistic view of the companies that you are choosing to put your money into. By doing this, you’ll have a better understanding of any potential opportunities or risks that you should be aware of that might impact your investment.
Why is ESG investing essential for your investment portfolio?
So, why is ESG important?
There is a long-held belief that investing in morally and ethically ‘good’ initiatives won’t always be the most beneficial to an investment portfolio that is focused on making money.
However, in many cases, ESG investing can actually be more beneficial than more traditional approaches. Here are some of the key reasons why ESG investing is essential for your investment portfolio.
1. ESG investing can offer better returns to your portfolio
When your money is being put toward more sustainable opportunities, your funds may be in a more secure company that won’t be affected by long-term environmental problems like drops in the price of oil.
Plus, because you are taking the extra time to look into the ESG ratings of the companies you’re considering investing in, you will have a better knowledge of potential opportunities and threats. Therefore, you’ll be more likely to pick companies that are destined for future success and can look forward to leveraging the benefits of a higher return on investments.
2. You can be optimistic about your decisions on ESG investment
Although the financial benefits of ESG investing may be the most important, it’s equally as important for investors to feel cheerful and satisfied with the decisions they make with their money.
When you’re investing in companies that are dedicated to improving the planet and finding better ways to keep our planet in a good condition for the next generation, you can feel like you’re also contributing to beneficial change on a personal level.
3. ESG investing makes you innovative
Any new approach to investing that differs from your traditional process compels you to unveil new companies and focus on different priorities than you’re used to – which often requires a much more innovative approach.
When you’re innovative, you’ll open yourself up to new – potentially lucrative – opportunities that can be of a huge benefit to your portfolio.
How can your office facilitate the development of ESG investing?
Adapting to flexible office space could in fact play an important role in your investment decisions.
Two of the main ways that a flexible office space can facilitate the development of ESG investing come down to cost effectiveness and versatility.
Flexible office solutions are an effective and affordable ways for many organisations to run their teams. By taking the need away from traditional office set-ups that can be expensive and behind-the-times when it comes to things like remote working and hybrid teams, companies can invest in a more sustainable way to manage their teams.
When you’re spending additional money on office space, especially when the majority of your team are not in the office 5 days a week, you’re better off spending your money elsewhere. This additional money that you have can be put towards your ESG investing efforts and help you transition to a sustainability-focussed investment portfolio in the future.
As we’ve mentioned, the modern office has completely changed from the one that many people were used to a couple of years ago.
The office no longer needs to be a permanent physical space, but can be one that is flexible enough to work for its many different workers.
A flexible workspace is the future of ‘the office’ and has been growing in popularity – especially since the pandemic – due to the versatile and flexibility of this way of working.
Investing in flexible office space now is the prime time while it’s still growing in popularity. With the way that attitudes toward work has been changing, demand for flexible office space is only set to increase further into the future.
Offices are an important part of the social factors included in ESG investing and are helping to support more inclusive, supportive and effective work environments across the globe.
In this article, we’ve discussed the importance of ESG investing and how it can be a huge benefit to your current investment portfolio.
Not only is building your ESG portfolio a great way to put your money towards sustainable and ethical companies that are trying to change our planet for the better, but it’s also a profitable option that can significantly increase your return on investment.