Broker Check

To ESG, or not to ESG

August 09, 2021

ESG (environmental, social, governance) factors are in focus once again and drawing much attention. Historically, companies have been evaluated based on their financials, expectations of growth, and in some cases leadership qualities.

ESG adds several new factors to this valuation as a way to shine light on other areas besides a company’s balance sheet. Many companies have created ratings systems to judge and compare based on these factors, but at the end of the day, can it really make a difference and should companies that are more focused on ESG factors be rewarded?

In my opinion, these factors change in the eye of the beholder. What is an essential ESG item to one person, may not be to another and these differences are extremely difficult to represent in a universal ratings system.

As such, I always will recommend to use the different factors of current ESG valuation as a foundation to form your own opinion. By doing so, you choose which companies reflect the values that are important to you. Investing in them will truly then be a partnership, and I believe will encourage long term investment and shareholder success.