Ethical Investing for the Future

Driving on the N1 South towards Johannesburg on a summers morning should provide you with a beautiful view of Sandton and Johannesburg. This might have been the case years ago, before the effects of Global Warming turned that exact picture into one of smog.

As a country we have a long way to go in sustainable practices. Eskom has never been more dependent on burning coal and running diesel generators as are they are now. As a society we are still wasting natural resources while contaminating our planet with hazardous waste and toxic emissions.

In recent times, much has been done in awareness of these factors in the investing sector. This is called ESG Investing and has become more prevalent in “Western Societies”.

What is ESG Investing?

ESG investing is sometimes referred to as sustainable investing, responsible investing, impact investing, or socially responsible investing (SRI). To assess a company based on environmental, social, and governance (ESG) criteria, investors look at a broad range of behaviors.

What criteria is used?

Environmental:
Environmental criteria may include a company’s energy use, waste, pollution, natural resource conservation, and treatment of animals. The criteria can also be used in evaluating any environmental risks a company might face and how the company is managing those risks.

Social:
Social criteria look at the company’s business relationships. Does it work with suppliers that hold the same values as it claims to hold? Does the company donate a percentage of its profits to the local community or encourage employees to perform volunteer work there? Do the company’s working conditions show high regard for its employees’ health and safety? Are other stakeholders’ interests taken into account?

Governance:
About governance, investors may want to know that a company uses accurate and transparent accounting methods and that stockholders are allowed to vote on important issues.

By using this criteria when investing in certain companies or sectors, it would eliminate companies who:

  • cause major environmental damage such as oil spills and nuclear waste;
  • use unstainable materials and productions methods;
  • produce weapons and firearms;
  • have major or recent controversies with human rights, animal welfare, environmental concerns, governance issues, or product safety.

Resource: https://www.investopedia.com/terms/e/environmental-social-and-governance-esg-criteria.asp

Ruvan J Grobler RFP™

Photo by niko photos on Unsplash

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