ESG Investing
Is there a way to make a bigger impact with your money?
There is far too much going on in the world today to only see the monetary returns our financial assets are creating. Our responsibility lies far beyond throwing money into an investment account and focusing only on returns, especially as Christians. What if there was another way to make an even bigger impact in the world in a positive way? There is.
Instead of concentrating only on investment returns, what if we focused on how our money is invested and what it is affecting? We have future generations to think about. Don't you want your money to support industries and companies that are working toward a positive impact on our world for the long haul?
How can I make a positive change with my investments?
"How do I do this?" you may ask. It is called ESG investing: Environmental, Social, and Governance. It has also gone by other names, like socially responsible investing and values based investing. In the Christian arena, we know it more specifically as biblically responsible or faith based investing. Here, we will cover ESG investing: what it is, how it started, and why it is important.
What is ESG investing, and how did it get started?
As the abbreviation implies, ESG investing focuses on environmental, social, and governance issues in an investment portfolio. It is a form of sustainable investing that considers not only the financial returns, but also the overall impact. Many of today's investors want their financial assets to do more than bank a temporary monetary return. They want their assets to also gain intangible returns by investing in a way that positively affects our world and its communities.
You may understand what ESG stands for, but how does it work, and how are these factors measured? Here is a quick breakdown.
Environmental
The environmental criteria for ESG investing include how a business performs when it comes to the environment and working toward greener initiatives. Are they a steward of nature, with recycling programs? Are they working to limit their greenhouse gas emissions? If the company is factory based, is its production generating sustainable products?
Social
The social aspect of ESG investing has to do with how the company manages its employees and its relationships with suppliers, the community, and its customers. It concerns how the business gives back to the community and to its employees. Are they providing healthcare, fair wages, and moderate vacation days? Are they holding fundraisers for local non-profits or donating to organizations that prioritize human rights and equality, even in other countries where they do business?
Governance
Governance, as the name implies, has to do with the "governors" of a business: the leadership and the controls in place. Is the salary leadership receives a fair amount? Are the necessary audits and internal controls being done, and are they coming back positive? ESG investing also looks for diversity in the company and whether it is responsive to shareholders.
How is it different from socially responsible investing?
While the two are very similar, there are a few differences. ESG investing focuses specifically on three distinct areas: Environmental, Social, and Governance. It is very precise in its categories, whereas terms like values based investing, socially responsible investing, sustainable investing, and ethical investing are broader. Historically, ESG investments not only filtered out "bad" companies, but also included companies they deemed to be making a positive impact in the world. Today, most of the socially responsible investing terms are used interchangeably.
Christian Financial Advisors uses faith based investing
It is very important to look into exactly what exclusionary investment portfolios look like for different companies. We stick to faith based and biblically responsible investing, a subset of socially responsible investing. We filter out a few more things that we deem negative and anti-biblical that may not be filtered out in ESG and socially responsible investing, while still investing in companies that are doing good in our world.
Is it right for you?
ESG investing is akin to the phrase "voting with your dollars." You might be one of the millions of people who choose to shop at a specific business because of what it believes in and supports. For example, you may choose to shop local instead of going to big-name stores, but that isn't the only way you can make an impact. With strategies like ESG investing, your dollars work for you and for what you believe in. If you want to make a greater, positive impact on our world today, ESG investing may be the right choice for you. It is a way to still make returns while making a difference.
At Christian Financial Advisors, we focus specifically on companies that do not go against biblical principles. Many Christians are now actively searching for the biblically responsible investing subset, which we are happy to help you with.
Keep exploring
Learn about the types of values based investing
Values Based Investing
Learn more →Faith Based Investing
Learn more →Socially Responsible Investing
Learn more →Green Investing
Learn more →Learn more about ESG and biblically responsible investing
Give our team a call at (830) 609-6986. We would love to help you set up a portfolio that aligns with your values and helps you make a positive impact on our world.