Throughout the last couple of years, investors have changed their motivations and tuned them to cause some benefit other than just financial profit. This is where the concept of ESG investment comes in. ESG investment enables investors to consider environmental, social and governmental factors before making any financial investment. Considering the drastically increasing rate of pollution and climate change in the world, any investment that leads to further environmental damage is obviously not worth it.
This kind of investment isn't a product of the 21st century though. It dates back to the 1960s when investors found it best to keep away from industries such as tobacco production houses. Thus it was then when the idea of creating value out of investment wasn't just about money but having an impact and leaving a meaningful legacy along the way.
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After conducting a proper study on how investors are being careful and concerned about various other factors rather than just financial, the World Economic Forum coined the term ESG. Today, CEOs of the largest companies get their heads together into considering the environmental, social and governmental impact of their products and services before actually launching them.
This becomes even more evident if we pay attention to how some products have the environment-friendly label as well as other text along with them, explaining their social and governmental benefits as well. The infographic below will further introduce you to the history of ESG investing and how it works.
Infographic by: EnergyMinute