On the face of it, ESG is just another impenetrable financial acronym – a vowel and two consonants that only mean something to those in the know. But what lies beneath could change the world…
We surveyed over 2,000 UK consumers, asking what they think ‘ESG’ stands for. Only 1 in 5 people knew (or correctly guessed) the answer.
Here are the options we gave them… which do you think it is?
1. Ethically Sourced Goods
2. Equities, Shares and Gifting
3. Executive Salary Guidance
4. Environmental, Social and Governance
5. Ethnic Social Guidelines
Keep scrolling for the answer!
If you went for number 1, ‘Ethically Sourced Goods’, you picked the same as 53% of the people we asked.
They were all wrong.
What does that have to do with investing? In short, it’s about putting your money where your mouth is – only investing in companies with sustainable, long-term working practices that avoid causing harm. These practices are measured according to their environmental impact, social responsibilities and corporate governance.
Would Extinction Rebellion and Greta Thunberg have harsh words for the company you’re investing in? Then it probably isn’t ticking the ‘Environmental’ box.
Is that company also forcing people to work unfair hours, hiring nimble-fingered 8-year-old seamstresses, or using customer data for nefarious deeds? Then don’t expect a good ‘Social’ score.
And, finally, is that company paying excessive bonuses to a board of homogenous megalomaniacs (here’s looking at you, Thomas Cook)? If yes, then ‘Governance’ needs some work.
We’ve gone over the makeup of ESG in more detail in our other articles, Is ESG the same as ethical investing? and Holly’s Blog: A kick in the financial nuts. (The latter also has some great practical ideas of how to get started and a few funds you might like to invest in. Check it out!)
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