ESG

Question 1

ESG

Answer 1

Environmental, social, and governance (ESG) investing is used to screen investments based on corporate policies and to encourage companies to act responsibly. ESG investing is sometimes referred to as sustainable investing, responsible investing, impact investing, or socially responsible investing (SRI). ESG looks at how a company’s management and stakeholders make decisions; sustainability considers the impact of those decisions on the world.

Question 2

ETFs

Answer 2

Exchange-Traded (Mutual) Funds

Question 3

Environmentally Responsible Investing

Answer 3

Environmental issues may include corporate climate policies, energy use, waste, pollution, natural resource conservation, and treatment of animals.

ESG considerations can also help evaluate any environmental risks a company might face and how the company is managing those risks.

Considerations may include direct and indirect greenhouse gas emissions, management of toxic waste, and compliance with environmental regulations.

Question 4

Socially Responsible Investing

Answer 4

Socially responsible investing (SRI) is an investment strategy that highlights this one facet of ESG. SRI investors seek companies that promote ethical and socially conscious themes including diversity, inclusion, community-focus, social justice, and corporate ethics, in addition to fighting against racial, gender, and sexual discrimination.
Does the company hold suppliers to its own ESG standards? Does it donate a percentage of its profits to the local community or encourage employees to perform volunteer work there? Do workplace conditions reflect a high regard for employees’ health and safety? Or does the company take unethical advantage of its customers?

Question 5

Responsible Governance Investing

Answer 5

ESG governance standards ensure a company uses accurate and transparent accounting methods, pursues integrity and diversity in selecting its leadership, and is accountable to shareholders.
ESG investors may require assurances that companies avoid conflicts of interest in their choice of board members and senior executives, don’t use political contributions to obtain preferential treatment, or engage in illegal conduct.

Question 6

ESG Criteria

Answer 6

ESG factors to help identify companies positioned for strong long-term performance.

Question 7

Environmental ESG Criteria examples

Answer 7

1. Publishes a carbon or sustainability report
2. Limits harmful pollutants and chemicals
3. Seeks to lower greenhouse gas emissions and CO2 footprint
4. Uses renewable energy sources
5. Reduces waste

Question 8

Social ESG Criteria examples

Answer 8

1. Operates ethical supply chains
2. Avoids overseas labor that may have questionable workplace safety or employ child labor
3. Supports LGBTQ+ rights and encourages all forms of diversity
4. Has policies to protect against sexual misconduct
5. Pays fair (living) wages

Question 9

Governance ESG Criteria examples

Answer 9

1. Embraces diversity on board of directors
2. Embraces corporate transparency
3. Someone other than the CEO is chair of the board
4. Staggers board elections