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ESG: The Investment of the Future?

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Have you heard of the acronym “ESG” before? A new wind is blowing through Wall Street and turning heads. According to Bloomberg, “ESG” could represent a third of all assets under management in 2025. Many investors show a growing interest in investing in companies that are making the world a better place. This explosion in new interest indicates a shifting mindset in the modern investor.

So what is ESG and why is everyone talking about it?

ESG is often used interchangeably with sustainable, responsible, or ethical investing. Investors are starting to use non-financial criteria to evaluate companies. By doing so, they are putting their money where their values are.

ESG is an acronym. The “E” relates to the impact a company makes on the environment. This might include energy usage, climate impact, and usage of green technologies. It might also include the types of resources it consumes or how it handles pollution and the disposal of waste. In other words, does the company have a positive, neutral or negative impact on the environment? The “S” stands for social. It relates to a company’s impact on its customers, local communities, employees and supply chains. For instance, does the company treat its workers fairly and make sure its suppliers do the same? What is the company’s stance on social justice issues? The “G” stands for governance. For example, how a company is run from the inside. Governance includes, policies that enforce ethical business practices, transparency to shareholders, and relationships with government regulatory bodies.

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What issues are important to you? Maybe you believe climate change is a big issue. As a socially conscious investor, you can use ESG to evaluate companies to invest in based on their net-zero carbon emission goals. Perhaps diversity is important to you and you’d like to prioritize companies that include women and minorities in their C-Suite. You can also use ESG to avoid companies that go against your values. Maybe you’d like to exclude companies that prioritize profit at the expense of treating their workers fairly.

How do I get started?

At Island Wealth, we strive to make a positive difference in the lives of the people we work with by helping them discover what truly matters. If socially responsible investing is important to you, we’d love to talk. Give us a call or send us message to learn more about how YOU can use sustainable investing to make a difference!

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