Sustainable investing takes into account environmental, social and governance (ESG) factors alongside traditional financial components. While this form of investing has existed for a long time, ESG has become a hot-button issue due to recent politicization and widespread public misconceptions around what it really entails.
ESG investing examines quantitative and qualitative non-financial data on companies. This includes environmental issues like carbon emissions, pollution and resource use; social issues like employee treatment and relationships with communities; and governance issues like diversity of corporate boards, business ethics and transparency.
