How does ESG investing differ from traditional investing?

ESG investing, which stands for Environmental, Social, and Governance investing, specifically incorporates these three critical factors into the decision-making process when building an investment portfolio. This approach goes beyond traditional investing, which typically focuses primarily on financial performance, such as revenue, profit margins, and return on investment. By integrating ESG criteria, investors assess how a company's operations impact the environment, how it manages relationships with employees, suppliers, customers, and the communities where it operates, and the governance practices that influence company leadership and accountability.

This holistic view reflects a growing recognition that sustainable practices can enhance long-term profitability and minimize risk, as companies that prioritize ESG factors are often seen as more resilient and better positioned for future challenges. In contrast, traditional investing may overlook these non-financial indicators, which can be critical to a company's long-term success and sustainability.