Environmental, Social, and Governance (ESG) © iStock | Galeanu Mihai

If the so-called “sustainable investing” just fools you into feeling good about yourself without creating any real impact, what is it really worth, then? 

The Environmental, Social, and Governance (ESG) criteria in the stock market 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 greenwashing by making their products, policies, activities, etc., appear more socially responsible and environmentally friendly than they actually are to fool investors.

Such companies use their ESG marketing schemes by taking advantage of people’s emotions of wanting to “feel good” in their investment activities, like they’re actually making a difference. 

The video below by libertarian and consumer journalist John Stossel explains how exactly these companies sell their “feel-good nonsense” while investors pay more to accomplish “nothing.”

How does genuine ESG investing make a difference?

Investing in real ESG funds, stocks, ETFs, etc., drives change as it pressures more organizations to compete in scoring the highest ESG ratings to sustain their businesses and evolve over time to be more of what they should be.

ESG © iStock | Olivier Le Moal

Why does ESG criteria matter?

Environmental concerns may include issues concerning corporate climate policies, energy usage, waste management, pollution control, conservation of natural resources, and ethical treatment of animals.

Taking ESG factors into account can assist in assessing a company’s exposure to environmental risks and its ability to effectively manage them, ultimately impacting its long-term sustainability and success.

When considering environmental impact, factors to keep in mind could be the amount of greenhouse gases released both directly and indirectly, the proper handling of toxic waste, and adherence to 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 efforts to eliminate 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 demand that companies avoid conflicts of interest in selecting board members and senior executives, refrain from using political contributions to gain preferential treatment, and steer clear of illegal activities.

Strong governance and transparency also ensure companies deal appropriately with bribery and fraud, thus becoming more stable in the long term.

IMPACT (ESG Screening) by Interactive Brokers (IBKR)

Mobile apps like IMPACT by Interactive Brokers for iPhone or Android help investors who prioritize ESG and transparency when deciding which companies to invest in.

The IMPACT App helps investors align their portfolios with companies that share their values. 

13 IMPACT values that cover the spectrum of ESG issues

Investors use the app to assess whether a firm aligns with their values, such as gender equality and land health, among others.

They can also select business practices they want to avoid, such as weapons manufacturing and animal testing.

They can then build, with confidence, a truly socially responsible investment portfolio, knowing that their investments align with their values.

The IMPACT video below demonstrates a clearer picture of how the mobile app processes the information:

Here’s a quick demo of how the IMPACT App works:

If you’d like to open an Interactive Broker (IBKR) account and use the IMPACT mobile app for ESG investing, you can also use my referral link and enjoy the perks.

Disclosure: The IBKR link above earns me a commission from interactivebrokers.com if you choose to open an account through it at no additional cost to you

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VEGN ETF: Vegan “Hardcore” ESG (S&P 500 cruelty-free version)

For investors worried about animal cruelty, environmental damage, and human rights violations, the Vegan ETF answers these investment concerns.

In one press article, GreenMoney even called the Index/ETF a more “hardcore” ESG approach in investing. The ETF is called Vegan Climate ETF (Ticker: VEGN), which you can read more about at this link below:  

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Disclaimer: This article is for educational purposes only. It should not be considered Financial or Legal Advice. Investors should conduct their own due diligence before making major financial decisions