Chris Worby is a Trusted Regina financial advisor and Wealth Management services provider. With over 20 years of experience, Worby Wealth Management has been committed to providing a high standard of financial and wealth management services to individuals, families and business owners in Regina and area. Worby Wealth Management listens and provides a personalized financial plan. In his latest Worby Wealth Blog Post, Chris Worby explains the difference between Ethical investments and ESG’s
Ethical Investing vs ESG’s – what is the difference?
Ethical investing and Environmental, Social, and Governance (ESG) investing are two investing approaches that consider non-financial factors when making investment decisions. While they share some similarities, there are distinct differences between the two concepts:
Ethical Investing
Ethical investing, also known as socially responsible investing (SRI), involves selecting investments based on specific ethical or moral principles. Investors who follow this approach seek to align their investment choices with their personal values or beliefs. This can exclude specific industries or companies that engage in unethical activities, such as tobacco, weapons production, or fossil fuel extraction. Ethical investors may also prioritize investments in companies with positive social or environmental impacts, such as those focused on renewable energy, sustainable agriculture, or healthcare.
ESG Investing
ESG investing, on the other hand, focuses on evaluating companies based on their performance in three key areas: Environmental, Social, and Governance factors. These factors are considered to provide a broader assessment of a company’s sustainability and long-term viability. ESG criteria encompass various issues, including a company’s carbon emissions, labour practices, diversity and inclusion policies, executive compensation, board structure, and more. ESG investors analyze these factors to gauge a company’s overall risk profile and potential for long-term growth.
Key Differences Scope of Consideration
Personal values and ethical considerations primarily drive ethical investing. It involves excluding or favouring specific industries or activities based on moral principles.
ESG investing focuses on broader factors, including environmental impact, social responsibility, and corporate governance. It seeks to assess a company’s overall sustainability and its potential impact on financial performance.
Investment Approach
Ethical investing often involves negative screening, where certain companies or industries are excluded from the investment universe based on ethical concerns.
ESG investing involves a more comprehensive analysis of a company’s ESG performance and may include positive screening, where companies with strong ESG practices are actively sought out for investment.
Motivations
Ethical investing is driven by personal values and a desire to support or avoid specific causes or practices.
ESG investing is motivated by the belief that companies with strong ESG practices are better positioned to manage risks, achieve sustainable growth, and create long-term value for shareholders.
It’s important to note that the distinction between ethical investing and ESG investing is not always clear-cut, and the terms are sometimes used interchangeably. Both approaches reflect a growing trend of investors seeking to incorporate non-financial considerations into their investment decisions, reflecting a broader awareness of social and environmental issues alongside financial goals.
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The comments contained herein are a general discussion of specific issues intended as general information only and should not be relied upon as tax or legal advice. Please obtain independent professional advice in the context of your particular circumstances. This Blog was written, designed and produced by Chris Worby for the benefit of Chris Worby, a Financial Advisor at Worby Wealth Management, a registered trade name with Investia Financial Services Inc., and does not necessarily reflect the opinion of Investia Financial Services Inc. The information contained in this article comes from sources we believe are reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the publication date and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any securities. Mutual Funds, approved exempt market products and/or exchange-traded funds are offered through Investia Financial Services Inc.