Responsible investing, an approach that integrates environmental, social and governance (ESG) criteria, is becoming a much sought-after strategy in the financial industry. Whether implemented through socially responsible investing (SRI) screening, ESG integration or impact investing, responsible investing offers a growing number of options for investors interested in achieving goals beyond financial growth when building their portfolios.
Responsible investing considers that progress toward solving global challenges such as climate change, social inequality and unfair business practices can be made by investing in companies and enterprises that promote sustainability or have sustainable business practices. This is not to imply that other forms of investing are unsustainable, rather these approaches aim to equip investors with additional information for choosing investments to meet all of their goals.
Through responsible investing, not only can investors aim to make a positive impact on society and the environment, they can potentially improve the risk/return characteristics of their portfolios by factoring ESG criteria into their investment decisions.