Investing is nothing new and people have always liked to put some of their spare cash into high-performing assets to make a profit. Whether it is a business looking to build extra wealth or an individual trying to grow a retirement nest-egg, this is true. Over time though, investing has naturally changed and moved forward. This can be seen in the digital revolution that trading has experienced in the last decade or so.

One fairly recent trend in trading is ESG investing. It is becoming something we hear more and more about now - but what is it, and which companies have solid ESG principles to consider investing in?

What is ESG investing all about?

ESG stands for Environmental, Social and Governance, and this gives an idea of how it can be applied when buying shares. In simple terms, ESG investing is a type of socially responsible investing that not only looks for financial returns but also the impact any company you put money into has on the environment, stakeholders and wider community.

A good example of a business that shows what ESG is all about are EBI Consulting. They made headlines for their EBICares charitable initiative, which was set up by then co-CEO Jeffrey Previte. He has since gone on to launch his own olive oil company (Previte Olive Oil), where he continues to build core ESG policies into his business.

How does this work for investors in the real world?

But how does ESG investing pan out in the real world for investors? Environmental, for example, looks at how any business affects the planet through how they manage their environmental impact, what climate change policies they have and how they are reducing their carbon footprint.

Social relates to how the company treats staff, customers and clients, as well as how it engages with the local community. Common things to look at here are how a business treats their staff, how ethical their supply chain is and if they take a stance on social justice issues.

Governance is linked to how the business is run in addition to how effective and ethical the leadership team are. This can include looking into how diverse the board membership is, any potential conflicts of interest at board level and the transparency of communication to shareholders.

What companies have strong ESG principles for investors to consider?

With news of Netflix laying off staff as subscribers drop, you can see why so many people now want to invest in ESG companies. Although huge tech corporations often get a bad rap, Microsoft is actually very strong in terms of ESG. Much of this is due to its status of being a world leader in energy efficiency and therefore doing its bit for the environment. With plans for 100% renewable energy by 2025 and policies to offset all the carbon emissions it has ever made by 2050, it clearly scores well in this regard.

Another tech behemoth which is focused fully on ESG principles is Nvidia. As well as being a top performer in the gaming sector financially over time, it is also known for treating people fairly and taking steps to strengthen company diversity. With plans to enact positive social change with its products and policies such as paying vendors when COVID-19 led to facilities shutting down, it is a strong ESG stock.

Which other businesses are known for a firm ESG focus?

Another company which many look to as a bona fide ESG stock is Best Buy. They are a leading consumer electronic retailer in North America and managed to achieve 100% waste diversion from their facility in Chino in 2020. They have also put $10m towards setting up teen tech centers in LA for young people to be educated on programming, music production and design.

Salesforce is a business which provide CRM software to its clients, and which has performed well financially in recent times. In terms of ESG, it also has some impressive credentials to look over. To begin with, it has hit net zero carbon emissions across its value chain and spent $16m on equal pay policies. In addition, it has set up a justice and racial equality task force.

Companies with strong ESG principles can be good investments

ESG investing is becoming more popular as people look to put money into well-run companies who care about their impact on the planet and focus on behaving ethically. By focusing on investing in companies like this, you should actually stand a better chance of seeing the return you want financially too. This is because ESG companies tend to have more effective leadership which helps them perform better. If you need to know more about this way of investing, hopefully our guide has helped.