Investing is done with a purpose to make money. And, many investors even while doing that want to stick to certain core values that they believe in – making the world a better place to live in. This is reflected in Environmental, Social, and Governance investing called ESG investing. The whole idea is to build a stocks portfolio of companies that are taking steps and measures towards addressing the environmental, social, and governance issues during their business operations.
Investing in clean energy stocks and ETFs seems to be increasingly getting the attention of global investors. More and more companies are also coming forward and letting investors know of their ESG activities as well. FactSet searched for the term “ESG” in the conference call transcripts of all the S&P 500 companies that conducted earnings conference calls from June 15 through September 5.
Of these companies, 150 cited the term “ESG” (in reference to environmental, social, and governance factors) during their earnings calls. This number marks a tie with the previous quarter for the highest overall number of S&P 500 companies citing “ESG” on earnings calls going back at least 10 years.
At the sector level, the Industrials (29) and Financials (28) sectors had the highest number of S&P 500 companies citing “ESG” on earnings calls for Q2. Combined, these two sectors accounted for more than one third of the total number of S&P 500 companies discussing “ESG” on earnings calls for Q2 2021.
But, does investing with a focus on ESG driven companies impact returns? Michael Iachini, Managing Director, Head of Manager Research for Charles Schwab Investment Advisory in his research report says ESG has tended to perform very similarly and with very similar levels of risk to non-ESG approaches. ESG funds have consistently ranked around the middle of their peer groups. ESG funds have done as well as other funds over time. You should take into account your investment goals and risk tolerance before getting started in ESG investing.