On November 12th, the 2021 United Nations Climate Change Conference (COP26) ended. This event may have prompted you to consider your own habits. Perhaps simply buying fewer single-use plastics, or making an effort to cycle, rather than drive to work.
As a trader in the financial markets, this might mean making more environmentally conscious investments, placing your capital in environmental, social and corporate governance (ESG) stocks. These not only provide great opportunities to make gains on your capital, but are also socially responsible.
These stocks are naturally going to have greater longevity than their unsustainable counterparts, but they are also attractive because they have proven to outperform non-ESG stocks during times of extreme market volatility.
Of course, investments in the oil market and in large corporations are still viable and lucrative, and you can invest in oil contracts for difference (CFDs) on an online trading platform like Plus500, for example. However, if you’re wanting to make more socially conscious choices with regards to your investments, you can also open speculate on the price of some top ESG stocks using this platform.
In this article, we’ll explain exactly what ESG investing is and why you should consider it when you next open a position in the stock market.
What is ESG investing?
ESG stands for environmental, social and corporate governance. Stocks that fall under this category are mindful of their company’s impact upon the world around them.
Firstly, look at how these stocks are considerate of the environment. This means taking into account their carbon footprint, their general supply sustainability efforts, and what chemicals are used in the manufacturing of their products.
Next, the stock will have to have a positive impact on society. This includes the diversity that the company promotes, through the people that it employs and the image it projects. The company will have a genuine desire to be as inclusive as possible, and work towards social good in its industry and the wider world.
Governance is concerned with how the company’s management and governing board work towards effecting a significant and positive change. This could be how diverse the management team is and how fairly each employee is paid, in addition to how the board creates relationships with shareholders.
Overall, an ESG stock is a company who is aware and conscious of how they present themselves in society, the impact that they have in society, and the effect that their company has upon the environment.
Why should you invest in ESG stocks?
One of the reasons to invest in ESG stocks, is the fact that your capital could not only do more for you in the financial market, but also for the environment and social equality.
When you open a position in an ESG stock, you’re investing in a company that is working towards making the world a better place, and doing their best to create a great product without harming the environment.
In addition, ESG stocks can give you great returns on your investment. On multiple occasions, ESG stocks have outperformed their less sustainable rivals, particularly during times of market turbulence. Additionally, because of the fact that ESG stocks aim to build greater relationships with their shareholders, there could be some great benefits when you invest.
Some examples of ESG stocks are:
- Microsoft (MSFT)
- Accenture (ACN)
- Linde (LIN)
- Motorola solutions (MSI)
- Gildan activewear (GIL)
- Metropolitan bank (MCB)
The next time you make an investment in the stock market, you might want to think about more than simply the price of the stock and the return on investment that you could receive. By investing in an ESG stock, you can be sure that the company that you are investing is having a positive impact on society, and a minimal impact on the environment.
