Contrary to what many may think, ESG (environmental, social and governance) is not an investment strategy. Rather, it’s a data tool. While many investors use ESG data to capture a set of values around which an investment strategy may be organized, it is most commonly used by institutional investors to detect material risks and opportunities associated with potential investments.
The ESG shorthand has become ubiquitous and is turning up in mutual funds, exchange-traded funds, separate accounts and in various investment mandates. Yet its exact meaning remains elusive. ESG is often associated with socially responsible investing (SRI), an investment strategy where securities are chosen based on their moral or ethical value to the investor. Products built along these lines can be both inclusionary and exclusionary.
Read the full article by Ben Webster (CEO of OWLshares, a provider of research, analytics and index creation services focused on environmental, social and governance (ESG) data)
