ESG Investing
Investors are becoming more cautious day by day. They look at different factors while investing their hard-earned money in the financial market.
Long-term investors generally focus on the asset with a high growth potential. And that’s the reason why ESG investing has become quite popular in the market.
Being a reputable signal provider, we connect with many traders and investors daily. Many of our clients don’t know about ESG. However, ESG is a must-know concept if you are an active trader or investor.
So, in Carlos and the company’s blog, we will have an in-depth study on ESG Investment strategies, top ESG stocks, and ETFs with the benefits of ESG investing. It will help our clients in planning their investments efficiently.
Here's a quick look at what you'll read
ESG is the short acronym for environmental, social, and governance.
ESG refers to investing in a company with a positive value in terms of environmental, social, and government contribution.
- ASML Holding
- Check Point Software Technologies
- Hermes International SCA
- Lindes
- Kone OYJ
- FGDL
- USXF
- MID
- Beginner Friendly
- Risk Management and Portfolio Diversification
- Growth Potential and High Returns
- Secure Investment
- Not Suitable for Short-Term Traders
- Expensive
- Limited Options
Understanding the concept of ESG Investing
ESG is the short acronym for environmental, social, and governance. These are the three pillars that help investors in making sustainable and financially sound decisions.
ESG investing is also known as sustainable investing or impact investing. It refers to investing in a company with a positive value in terms of environmental, social, and government contribution.
Under the ESG investment strategy, investors analyze a company, considering how effectively it fulfills its responsibility toward the environment, society, and the government.
Generally, in the stock market, long-term investors consider ESG criteria before investing their money. Here are the three elements of ESG investment and what it includes for better understanding:
Environment
It includes how a company fulfills its responsibility towards the environment and what measures and initiatives it takes to protect the ecology. Many investors prefer green investing due to the rise in environmental concerns.
Society
A company also has a responsibility towards employees, suppliers, investors, and the general public. It includes activities like donation, ethical consideration, employee health and safety programs, etc.
Government
It deals with how effectively a company follows the rules and regulations of the government. It includes tax payments, timely audits, conflict management, balance sheets, and record maintenance.
Top High ESG Investing Stocks and ETFs
You must think of why you should look at ESG factors as you aim to make money in the market. However, many reports suggest that high ESG stocks give more returns than others.
So, high ESG products are not only environmentally friendly but also investment-friendly. In order to help you out, here is the list of the high ESG financial instruments to spread your capital:
ESG Stocks
You can invest in the stock of the companies with high ESG. Global giants invest significantly in conducting consumer social responsibilities and ESG activities. Below are the top ones:
ASML Holding
It’s a multinational company based in New Zealand that develops semiconductors and advanced machines. The company has an ESG score of 73.13.
Check Point Software Technologies
It is a software-developed company based in Israel. With an ESG score of 72.64, it is amongst the best to invest your money in.
Hermes International SCA
It’s a leading apparel and footwear brand based in France. The ESG score is around 71.71, which can be a good option for ESG investing.
Lindes
It’s a large-cap company based in the United Kingdom and strongly influences the European market. The company deals in chemical energy products, including hydrogen, oxygen, nitrogen, and others. It has an ESG score of 71.26.
Kone OYJ
Kone OYJ is a leading company that designs escalators, lifts, and advanced automated machines. Its ESG score is around 70, and the company is based in Finland.
ESG ETFs
Well, if you don’t want to invest in a single company, you can invest in ESG ETFs. ETFs include a basket of stocks, bonds, indexes, and other financial assets. So, you can also invest in high ESG funds like the below options:
FGDL
Franklin Responsbility Sourced Gold ETF is the ideal investment for gold traders. It is listed at NYSE Arca and has a good performance record. It has given a profit of around 26.46% to investors and facilitates low-cost trading.
USXF
iShares ESG Advanced MSCI USA ETF is the best for investing in the large-cap and middle-cap stocks of the US. With a good growth potential, the ETF has a positive ESG rating.
MID
American Century MID CAP Growth ETF is another good option for ESG Investing. You can invest in midcap companies that are aligned with the UN sustainable development program through these ESG index funds.
Benefits of ESG Investing
There are many reasons why investors prefer high ESG stocks for trading. Let us have a look at the key benefits that make ESG investing better:
Beginner Friendly
Investing in the right asset requires market knowledge, analytical skills, a good strategy, and much more. For novice traders, identifying the right stock is quite difficult. Thus, they can go for high ESG stocks and ETF funds. This instrument offers great market conditions to new and passive investors.
Risk Management and Portfolio Diversification
Investing in stocks, commodities, cryptocurrencies, bonds, or any other financial instruments involves a significant risk. ESG investing is also the best way to manage your risk and diversify your portfolio.
High ESG stocks are comparatively less risky and offer stable market conditions. So whether you are a long-term or short-term trader, you can diversify your capital into these assets.
Growth Potential and High Returns
A company will only contribute a good amount to ESG activities when it is in a more financially sound state. The idea of investing in ESG stocks is based on sustainable finance.
Here, you are not only looking at the financial aspects but also the other aspects that make a company survive for the longest. Thus, the probability of growth and potential returns is higher with ESG stocks.
Secure Investment
Most people fear entering the investment world due to the risk of losing money. However, with ESG stocks, traders can earn consistent returns with proper risk management strategies.
In addition, the chances of financial scams, fraudulent activities, and manipulations are limited. Generally reputable and large companies have a high ESG rating, so ultimately, it is a more secure option.
Limitations of ESG Investing
With the above benefits, ESG also has some limitations. So before starting investing in ESG, have a look at these limitations:
Not Suitable for Short-Term Traders
High Inflation means lower purchasing power and weakness in currency. Meanwhile, low inflation means high purchasing power and strength in the currency.
Expensive
To invest in an ESG stock, you need a significant amount of capital. Generally, big giants with great reputations have high ESG value. So, naturally, the stock prices are comparatively higher than those of the others. In addition, the trading fees or broker commissions are also higher.
Limited Options
When it comes to fulfilling environmental, social, and governmental responsibilities, only large and established organizations can contribute a significant amount. However, growing or small companies may not have such a high ESG rating. Thus, you have limited stock options if you want to invest in ESG.
Conclusion
ESG investing is a great way to invest money in the finance market with limited risk and high profit potential. However, if you are a full-time trader or investor, then you need to consider other products also. You cannot limit your portfolio to ESG stocks or ETFs.
Investment is all about diversification; a balanced portfolio is a must for success. Thus, you can also consider stocks, forex, and commodities for a consistent trading journey.
You may have trouble identifying the right opportunities in such financial instruments. However, do not worry; Carlos and company is there for you. We provide valuable alerts in both ESG and non-ESG financial instruments to diversify your capital.