What is ESG investing?

The ESG approach considers not only the profit of a company but also the direct and indirect effect the company has on the well-being of others and the planet. When determining the ethics of a company’s operations, the factors are based on three categories — environmental, social and governance.

As Canadians have been increasingly interested in climate change and human rights, investors are looking to support ESG companies as a way of aligning their investments with their priorities of creating a better world. As with any investment, it’s essential to consider the relationship between risk and return.

ESG Investing

The ESG approach considers not only the profit of a company but also the direct and indirect effect the company has on the well-being of others and the planet.

When determining the ethics of a company’s operations, the factors are based on three categories — environmental, social and governance.

A company could be considered ESG if they are addressing one of more of the following:

Environmental

Conservation of the natural world

Biodiversity
Climate change and carbon emissions
Clean technology
Air and water pollution
Sustainable agricultural practices
Waste management
Water scarcity
And more

Social

The human impact of companies and their workers

Data protection and privacy
Gender and diversity
Employee engagement
Community relations
Human rights
Labour standards
And more

Governance

Standards for running a company

Board composition
Audit committee structure
Bribery and corruption
Executive compensation
Lobbying
Political contributions
Whistleblower schemes
And more