Environmental, Social, and Corporate Governance (ESG) helps to measure the sustainability and societal impact of an investment in a company or business. It also helps to determine the future financial performance of companies in terms of return and risk.
ESG investing is an investment philosophy that gained popularity over last past few years. It is synonymous with sustainable investing that seek positive returns by engaging with ethical firms.
ESG investors avoid stocks of companies that fail to meet certain environmental, social or corporate governance standards. Examples of such stocks could be heavily polluting chemical companies or companies which have poor labour standards or unfriendly to minority shareholders.
In India, a number of mutual fund houses launched ESG funds though no uniform standards for ESG yet and fund houses have adopted their own methods to determine which stocks make the ESG cut. This drives to create your own ESG portfolio though it will require you a significant amount of time and energy towards researching these companies.
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