People are starting to put more thought into the companies that they choose to invest money in. It isn’t just about wanting to turn a profit any longer. People are also concerned with other factors such as the societal impact of the companies that they’re working with. This is why environmental, social, and governance (ESG) criteria have become such a big deal in the world of investing. 

The Rise of Impact Investing

The rise of impact investing has changed things in many ways. People are beginning to want to invest money in companies that are doing things that are positive for society as a whole. They want companies to reach certain levels of transparency so that they can feel good about the money that they’re investing. This is why ESG criteria have become so important. 

ESG Criteria

ESG criteria are something that can be better understood when you break down each part of the acronym. Environmental criteria will involve things such as the environmental impact that a company is having on the world. This can be anything from waste pollution to how the company is using energy. Even factors such as nature conservation efforts, animal treatment, and general pollution stances can factor into this. 

The social criteria will measure how the company is doing with factors such as social values. Does the company have good values and do they work with other companies that hold similar values? What does the company do to help local charities and how do they treat their employees? These are all substantial concerns that play a huge role in how investors will see them, and it makes sense that people are more concerned about social issues now more than ever. 

Finally, you have the governance category that covers things such as accounting methods. This is about how transparent the company is about accounting and doing things above board no matter what. People don’t want to invest in companies that they feel are shady. This is a huge part of the ESG criteria because it determines how stockholders are dealt with, how board members are selected and treated, and so much more.