As the world’s hottest day was recorded on 3 July this year, ESG investing is a trending topic for investors. Studies show that companies with strong ESG practices tend to outperform their peers over the long term and are well-positioned to navigate risks, capitalise on emerging opportunities and drive sustainable innovation, which, in the long term, is good for the environment and your pocket.
This record-high temperature is cause for concern and shows the lack of global progress in tackling climate change. We all know it is an issue, but we seem somehow distanced from it or feel that action seems too big an endeavour to attempt and that it should be left to the governments who have the resources to affect change. We have a responsibility towards the environment as all humans are part of the cause of global warming.
By simply incorporating ESG funds into our portfolio, we can help in the battle to save the environment. It’s not just about protecting the environment. Investors are also concerned about the bottom line. Companies that follow ESG principles like considering environmental risks, such as climate change and resource scarcity, social risks related to labour practices and community engagement, and governance risks, such as board diversity and transparency, allow investors to assess the long-term viability of investments better and reduce exposure to potential risks.
Integrating ESG investments allows investors to navigate regulatory changes more effectively, and studies have shown that companies with strong ESG practices tend to outperform their peers over the long run.