Environmental, Social & Governance (ESG) investing: Socially responsible investment or socially irresponsible scam?

“The ugly truth is that most so-called sustainable investment funds charge more to sell feel-good nonsense. But it shouldn’t make you feel good to pay more to accomplish nothing.”

John Stossel, libertarian journalist

The Environmental, Social, and Governance (ESG) criteria in the stock market investment world are used to screen investments based on corporate policies and to encourage companies to act responsibly. ESG criteria can also help investors avoid investment losses when companies engage in risky or unethical practices and are held accountable for them.

However, the rapid growth of ESG investment funds has also led to claims that companies have been insincere or misleading in touting their ESG accomplishments. They are said to be greenwashing to fool investors, whereby companies or businesses make their products, policies, activities, etc., appear more socially responsible and environmentally friendly than they actually are.

Such companies use their ESG marketing schemes by taking advantage of people’s emotions of wanting to “feel good” in their investment activities—making them feel like they’re really making a difference. The video below by libertarian journalist John Stossel explains how exactly these companies sell their “feel-good nonsense” while investors pay more to accomplish “nothing.”

IMPACT (ESG Screening) by Interactive Brokers

If ESG and its transparency are important to you, like it is to me, in deciding what companies or businesses we will invest in, then the best way available right now is through mobile apps like IMPACT by Interactive Brokers.

The IMPACT App helps you align your investment portfolio with companies that share your values. There are 13 IMPACT values that cover the spectrum of ESG issues. For example, you can use the app to understand if a firm supports your values, such as gender equality and land health. You can also select business practices you want to avoid, such as weapons manufacturing and animal testing. And then build, with confidence, a truly socially responsible investment portfolio yourself—knowing that your investments really align with your values.

The IMPACT video below will give you a clearer picture of how to do it:

And here’s a quick demo on how to use the IMPACT App:

You can open an Interactive Broker account using my referral link to enjoy additional perks.

How does genuine ESG investing make a difference?

Investing in real ESG funds, stocks, ETFs, etc., through the IMPACT App screening process drives change as it pressures more companies and organizations to compete in scoring the highest ESG ratings to sustain their businesses and evolve through time to be more of what they really should be—making it worth starting our journey toward creating sustainable investments while encouraging companies and businesses to do the same.

Why does ESG criteria matter?

Environmental issues may include corporate climate policies, energy use, waste, pollution, natural resource conservation, and treatment of animals. ESG considerations can also help evaluate any environmental risks a company might face and how it manages them, which can determine if it will thrive in the long run. Considerations may include direct and indirect greenhouse gas emissions, management of toxic waste, and compliance with environmental regulations.

Social aspects look at the company’s relationships with internal and external stakeholders. Socially responsible investing (SRI) has investors seeking companies that promote ethical and socially conscious themes, including diversity, inclusion, community focus, social justice, corporate ethics, and fighting against racial, gender, and sexual discrimination, as organizations will likely thrive when their employees and customers are treated fairly.

Governance standards ensure a company uses accurate and transparent accounting methods, pursues integrity and diversity in selecting its leadership, and is accountable to shareholders. ESG investors may require assurances that companies avoid conflicts of interest in their choice of board members and senior executives, don’t use political contributions to obtain preferential treatment, or engage in illegal conduct. Strong governance and transparency also ensure companies deal appropriately with bribery and fraud—thus becoming more stable in the long term.

Best ESG Exchange Traded Fund (ETF) investment option

For investors who are worried, like me, about climate change, cruelty to animals, or even both, we now have an ETF that caters to our requirements and addresses our investment concerns. I personally consider this the best and the most hardcore genuine ESG investing of them all.

The ETF is called Vegan Climate ETF (Ticker: VEGN) which you can read all about it at the link below:

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