Do ESG criteria increase the value of the company?
When talking about ESG investments, they refer to those that consider environmental, social and governance factors, in conjunction with financial factors, in the decision-making process to invest. Currently, as investors we are faced with new risk factors that lead us to rethink investment approaches. For example, there are the challenges of global sustainability in all its variations, as well as demographic changes and regulatory pressures.
In this way, ESG investments arise − and grow annually −, which are based on three lines of action: thematic investments or those that integrate ESG criteria in their portfolios; investments aligned with the values and moral beliefs of an organization or individual; impact investments that seek to combine positive social or environmental benefits with a financial return.
Therefore, if you are thinking of making investments with an ESG focus, you must answer questions such as: how much does the company in question contribute to the environmental impact? What actions does it take − or fail to take − to reduce carbon dioxide emissions? How do you improve social impact? And so we could continue with endless questions, all of them linked to the adoption of ESG criteria when investing.
Of course, as in everything that is a trend, there are cases in which ESG investments, unfortunately, can fall into the trap of a merely discursive construction by some companies. For this reason, the great challenge for investors lies in identifying when the ESG approach of the organization in which they wish to invest is part of a strategic definition, and not a simple brand discourse or marketing action, which is known in the industry as greenwashing, which prevents seeing and addressing the real problem.