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More and more investors are letting their principles guide their investment decisions. Rewarding responsible corporate citizens with their investment dollars, or unloading the stock of companies who do not match their meet their standards. This has led to the rise of ESG, which stands for Environmental, Social, and Governance and refers to a set of criteria used to evaluate a company's performance beyond just financial metrics.
- Environmental: How do a company’s actions impact climate change, resource management, and pollution? Have they made efforts to become more sustainable?
- Social: How a company treats its employees, communities, and customers, including diversity, labor practices, and human rights. Are they union-busters? Outsourcing production when they should not me?
- Governance: A company's leadership structure, transparency, and ethical practices.
Investing in ESG mutual funds or ETFs.
There are a few ways to get started with this approach. The first is to look for ETFs and Mutual funds that do their own vetting of companies and build their mix of stocks around companies that meet their ESG standards. If you're considering investing in an ESG ETF or fund, familiarize yourself with their standards and the mix of companies in the funds to make sure it aligns with your intent.
Investing directly with corporations.
The second is to invest directly in companies who have high ESG ratings. There are several companies who rate corporations, such as Bloomberg, Morningstar, and Moody’s. This allows you to more directly choose more directly companies that align with your values. Of course, as with any investment, there is risk involved.
ESG, as an investment approach, offers a path to aligning your investments with your values and contributing to a more sustainable future. There are some who question the value of an ESG label and whether there’s an unwarranted premium on these funds/ratings. Be sure to check on any associated fees for managing these funds, as some tend to have higher than average fees.
If ESG investing is a priority for you, reach out to the Range team to discuss your strategy.
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