Investors take different routes when taking a decision on where to make an investment, and often go with the most profitable variable they come across. ESG refers to the choice where investors make their investments for the well-being of environment, human and sustainability.
ESG investing is given a series of identities since it covers an array of investment priorities; impact investing, sustainable investing and socially responsible investing are a few of the identities ESG possess.
History of ESG Trading and Investing
The fundamentals of ESG investing could run back up to more than hundred years that has been influenced by religions and traditions;
- Shariya law – The one’s who follow the Shariya law (specifically in the Muslim faith) requires to donate a small chunk of their income for the sake of the goodwill of sustainability.
- Methodist faith – In regions like UK and USA the community who identifies themselves as Methodists need to make arrangements to enhance the financial performance of their faith-related organizations, since it directly affects the environmental and social factors.
Inspired by the history, one of the key components of ESG investing in an organizational context is environmental sustainability. This refers to the extent to which a company is able to operate in a way that minimizes its impact on the environment. This can include practices such as reducing greenhouse gas emissions, conserving water, and using renewable energy sources. Companies that prioritize environmental sustainability are not only better for the environment, but they are also often more efficient and cost-effective in their operations.
Insurgence of ESG Investing
In recent years, ESG investing has become increasingly popular among investors. ESG investing has gained popularity due to the growing awareness of the impact that companies have on the world, as well as the recognition that companies with strong ESG practices often perform better financially in the long run.
Another important component of ESG investing is social responsibility. This refers to the extent to which a company is able to operate in a way that is fair and just to all of its stakeholders, including employees, customers, and the broader community. This can include practices such as paying fair wages, promoting diversity and inclusion, and supporting local communities. Companies that prioritize social responsibility are often more attractive to consumers and are more likely to have loyal customers.
Furthermore, the impact Covid-19 that caused a lot of market disruptions and uncertainties made the ESG market worth up to $45.6 trillion within the first three months of 2020.
Future of ESG Investing
The future of ESG investing is likely to be influenced by regulatory changes. Governments around the world are increasingly focused on promoting sustainable business practices, and they are introducing regulations to encourage companies to prioritize ESG practices. For example, the European Union has introduced the Sustainable Finance Disclosure Regulation (SFDR), which requires financial institutions to disclose how they integrate ESG factors into their investment decisions.
Moreover, the sustainable investments made have a worth of $30.t trillion as for now, and is predicted to pass $50 trillion within the next two decades.
