Making a difference
The practice of integrating ESG issues into investment research has evolved significantly from the days of merely excluding companies on the basis of moral values. As ESG investing becomes more widespread, it's having a greater impact on both ESG issues and financial returns.
ESG investing used to be considered a niche market. No longer. Over the past 20 years, it's grown from 55 funds that mostly excluded polluting corporations to more than 900 funds representing a diversity of approaches.
ESG investing has grown in both its influence and its assets under management.
The percentage of business executives who recognize sustainable practices as being important to their shareholders has more than doubled in recent years as more investors raise ESG issues through shareholder proposals.
One early criticism of ESG investing was that eliminating certain stocks would hinder performance. However, investment results suggest otherwise. Moreover, academic research has found that the high sustainability companies have outperformed low sustainability companies in terms of both stock market performance and return on equity.