‘It’s a multi-dimensional conundrum,’ says the author. ESG investing is explained by an investment expert.
ESG investment is seen by many investors as the next frontier in finance, enabling community and environmental growth, but is it all that it looks to be?
In recent years, there has been a significant shift toward sustainable and responsible business, as evidenced by the surge in popularity of ESG investing.
Rob Morgan, an investment analyst at Charles Stanley Direct, spoke to This website about the challenges of ESG investing and the details that are stumbling blocks.
“This is expected to continue as investors increasingly seek to do environmental and social good while also securing fair returns,” Mr Morgan said of the growing popularity of ESG among investors.
“Continued expansion will be critical in addressing many of the world’s most important concerns, including climate change and inequality.”
Additionally, whether or not a potential investor is aiming for a 100% ESG investment, evaluating potential investments via the lens of ESG is extremely beneficial.
“A thorough ESG review can identify important risks and be beneficial to all investors, including those with non-financial objectives.
“Businesses that do not address significant environmental and social concerns, or pay attention to governance issues, may be unsustainable in the long run, and are more likely to face unfavorable press or even customer backlash in the short term.”
However, investment is a difficult task, and ESG investing is much more difficult due to its intricate complexity.
“While ESG principles can be simple at a high level, things can quickly get complicated if you go deeper into them,” Mr Morgan explained.
“A lot of concerns are subjective, and a lot of things are difficult to quantify accurately.
“For example, a company’s carbon intensity may be simple on one level (its own carbon dioxide emissions), but what about the emissions related with its supply chain and the effects of using the product it produces?
He continued, “There are many different ways to measure the same thing, and they don’t always agree.”
“Comparing a company in one industry to another is also unfair.
“A concrete producer, for example, will have a greater environmental impact than a financial services intermediary, but there is little alternative to using concrete to build things, and because it has such a large impact, improvements in how concrete is produced could have a significant impact.”Brinkwire Summary News”.