It’s no secret that there are a ton of different ways to invest your money these days. From Bitcoin to banana futures, the smorgasbord of options is as dizzying as it is complex. You may have heard of a relatively new and en vogue investing acronym thrown around at a cocktail party or online: ESG. The three letters stand for Environmental Social and (corporate) Governance and refer to investment strategies that hold companies dedicated to being stewards of these specific areas. This method of investing has become quite popular because it can reduce portfolio risk and generate solid returns. But maybe most importantly, it also helps investors sleep better at night knowing their money’s invested in companies that do things that are good for society. You know, putting your money where your mouth is and all that. Let’s break this acronym down by the letter.

E is for environmental

Companies that are committed to protecting the environment are not a new thing, but they’re at the core of this investment philosophy. Being good stewards of the planet from a business perspective typically involves catering operations to be sensitive to areas such as:

• Climate change policies, plans and disclosures
• Greenhouse gas emissions goals, such as usage, conservation, overfishing, and waste disposal
• Carbon footprint and carbon intensity (pollution and emissions)
• Water-related issues and goals, such as usage, conservation, overfishing, and waste disposal
• Usage of renewable energy including wind and solar
• Recycling and safe disposal practices
• Green products, technologies, and infrastructure
• Environmental benefits for employees such as cycling prog

S is for Social

This component of the ESG investment strategy focuses on societal or issues that impact other human beings. Whether it’s end-customers or employees within the organization, these companies are dedicated to improving overall society and the way people are treated. Some of the things these companies make a commitment to are:

• Employee treatment, pay, benefits, etc
• Diversity and inclusion hiring
• Ethical supply chain sourcing, such as conflict-free mineratls and responsibly sourced food and coffee
• Mission or higher purpose of the business (beyond profit)
• Consumer friendliness, commitment to customer service, and consumer protection issues
• Public stance on social justice issues

G is for Governance

The final letter in our tidy little acronym refers to corporate governance. Put more plainly, this part of the investment strategy focuses on companies’ stances on things like whether they’re shareholder friendly vs management-centric, how the business is run, and whether corporate incentives align with business performance. Some other areas that pertain to governance are:

• Executive compensation structure, bonuses, and benefits
• Golden parachutes for executives
• Diversity among the board of directors and management
• The relationship between chairman and CEO roles
• Structure of stock classifications
• Transparency levels with shareholders

The advent of ESG strategies bucks the conventional approach of investing purely for maximizing profit. While the goal is to still grow the asset base, that objective takes a back (or at least passenger) seat to the greater good. In today’s age, it’s no surprise that this method is gaining momentum. With symptoms of global warming intensifying and the fallout from the last financial crisis, people are increasingly sensitive to (and passionate about) issues like combatting climate change and ensuring corporate accountability. In fact, according to a recent study, roughly 80% of millennials said they preferred investing in socially-responsible companies. The good news is that many household names like Nike and Coca Cola are considered ESG investments, so investing with a conscience is easier than you think. And, ESG exchange traded funds (ETFs) offer another easy and cost-effective way to gain broad exposure to this type of strategy.

Fortunately for Evervestment clients, we’ve already done the legwork and are proud to offer our Evercare strategy, which holds a variety of ESG securities. We’ve carefully designed this portfolio for clients interested in this space and feel it offers an ideal mix of ESG investments. If you’re interested in becoming an Evervestment client, please visit our homepage and select the Evercare portfolio option to sign up today.