One of the most raging debates over the past few years has been between environmentalists and industrialists, who keep stressing the need to enhance their respective muses.
But to be fair, it’s very hard to choose between economic development and sustainability. Somehow, favoring one has historically always led to hampering the other.
Considering the elements of the ecosystem as “resources” has put a price tag on nature. In fact, investing and market experts have started helping shape the future of investments, which is expected to be in natural resources.
Classified under the umbrella term green investing, ESG Investments (Environmental, Social, and Governance Investments) are becoming an extremely important concern to the investors who want to make sure that their money is aiding global sustainability rather than mistreating it.
Understanding ESG Investing and Its Importance
ESG investing believes in using environmental, social, and governance components to evaluate how far countries have come in terms of sustainability. The “Environment” aspect of the concept aims at the efforts of a country towards the sustentation and preservation of natural resources.
When it comes to the “Social” component, it revolves around how organizations in the country treat their employees. And finally, the “Governance” aspect is the pillar and the framework by which the organizations in the country are judged.
Needless to say, the concept is quite significant. All thanks to ESG, organizations across the world are held liable for their efforts towards development while keeping environmental conservation at the forefront. They have to be intently involved in finding ways to grow their revenues without neglecting a positive contribution to society and the environment.
Should you invest in developed or developing ESG compliant countries?
As the attention to sustainability increases, developed countries hold the majority of stakes in green investments. But the question that often arises is, are they just trying to look good while overshadowing their unrestrained past developments at the cost of the environment? TBH, nothing can be said with certainty.
The significance of ESG criteria should be considered and closely examined while calculating investments in developed countries. Also, since it seems that for now, the responsibility of balancing economic development and impact on the environment sits largely in the hands of developing countries, they might make for a more sensible investment.
How viable is the ESG approach
The procedure for determining the ESG rating for a country may not be objective each time. Since disclosures and orders vary from country to country, there aren’t any similar set of criteria that are used by everyone.
The standards may also vary from industry to industry, and France’s financial regulator thinks this may lead to universal greenwashing. He also states that this practice may highly risk the credibility of the market.
Wrapping it up
ESG investing is becoming highly mainstream even as some still believe that the concept is ”too little, too late”. But it can’t be denied that to stress sustainable measures, we need to sharpen our focus on slowing the effects of climate catastrophe in any way possible. Preparing the industrial world to help in this bid can actually make a big difference.