Everybody wants to save the world. Living amidst so much social and environmental upheaval only amplifies that sentiment. People want to be part of a solution, which is why environmental, social, governance (ESG) investing is at an all-time high. And with all the money currently flowing into the ESG industry, it’s more important than ever that companies track and share their ESG data with stakeholders.
Investors need to have the full picture of where they’re putting their money to be confident an investment is supporting their values and goals. Before making an investment decision, consider these 4 key questions to strengthen your ESG portfolio and reduce your ESG investment risk:
1. Does the company consider more than just environmental issues?
Most companies place emphasis on the environmental (‘E’) side of things, and even more specifically on carbon reduction. But if a business is thinking holistically about their ESG initiatives, they need to look beyond the ‘E’ and consider the ‘S’ and the ‘G’ too. When you begin to do your research, investigate what practices businesses are employing around the ‘S’ and ‘G’. Do they promote a diverse and inclusive workplace that boasts equal opportunities for all? Do they comply and meet with government audits and regulations?
2. Do they have an overarching and integrated ESG strategy?
Different companies will have different goals, but with so many businesses making bold ESG commitments, we can easily enter greenwashing territory. What separates the dreamers from the do-ers is an actual plan. For instance, look for more than a corporate goal like net-zero emissions by 2050; look for the plan that will get them there. For progressive companies, sustainability principles will be integral to their organizational DNA and evident in their purposeful actions.
3. What is the company doing right now to make their ESG goals a reality?
Plans that culminate in a reduction of GHG emissions 30 years from now sound great in theory, but what is happening in the meantime? Lofty goals need actionable steps that will end with businesses meeting their targets. What is the business doing to improve their energy efficiencies today? Is a 10% reduction in emissions feasible this year? And how will they be demonstrating that progress?
4. Does the company share their ESG data with the public?
Once again, claiming to be ESG-friendly and announcing goals and commitments isn’t enough if the business isn’t sharing where they are in the process. Look to see if the organization shares regular reports of their sustainability data and progress with stakeholders. Transparency is key, and it is even better if that reporting is being done in real-time.