ESG investing has enjoyed a meteoric rise over the past decade. Within this blog, we explore:

• What is ESG? 

• The increase in demand for ESG investing  

• The growth of ESG investing in emerging markets  

• ESG investing trends within Europe  

• Five ESG companies to invest in for 2022  

  

What is ESG?  

Before we delve into the topic, it’s important to address precisely what ESG investing means. Firstly, ESG stands for Environmental, Social & Governance. ESG investing is investing in line with a set of criteria that have a positive impact on one, two or all three areas.  

Environmental	The carbon footprint of a company Efforts made by a company to tackle climate change through greenhouse gas reduction  Responsible waste management   The use of energy-efficient buildings   Resourceful practices   Use of sustainable materials   Eco-friendly cleaning solutions
Social	The application of human rights across an organisation  Working with suppliers who meet the same human rights standards   Selling products/services to socially responsible organisations   Application of labour laws   Applying cross-border labour laws into nations with lower labour law standards   Health & safety standards within the workplace    Integration with the organisation’s stakeholders (local community/affected people)
Governance	A clear list of principles that defines rights, responsibilities and expectations between various stakeholders in the governance of corporations

The increase in demand for ESG investing  

In recent years there has been a widespread increase in awareness and consciousness of corporate irresponsibility. The internet has allowed greater amounts of information to be shared about the damage caused by organisations that operate without applying ESG practices. 

Independent entertainment company Netflix has produced several documentaries designed to make people think twice about their consumption choices. These include  Seaspiracy, which documented the harmful practices of fishing, Planet Earth  which documents earth’s most fragile eco-systems and how humanity can help protect them, and  There’s Something in the Water  which highlights environmental hazards caused by corporate and government activity. 

ESG investing and emerging markets  

Emerging markets, also known as developing nations, play a major role in global supply chains. Developing nations, including China, India, Mexico, and Pakistan, produce and export goods worldwide. Developed nations opt to import from these nations as the cost is far lower than domestic production among over reasons.  

Consumers have become very accustomed to the cost of goods produced in developing nations. However, increasingly, consumers are becoming aware of the ESG issues associated with this globalised model.    

These include poor workers’ rights in developing nations, including low minimum wage standards, poor health and safety records, hazardous waste management and greenhouse gas production. Investors around the world are demanding more from companies and are positioning their portfolios and investments accordingly.  

Across the financial services industry, research and analysis is being conducted to established the most responsible companies, who prioritise positive change, ethical standards and transparent reporting. It can be difficult to establish whether or not a business is fully ESG without conducting in-depth analysis. Many companies claim to have a positive impact on the environment. However, much of this is simply PR.  

With a rise in interest in ESG investing, we highlight five large-cap companies that have received top ESG ratings from the analysis conducted by MSCI. This rating has been produced using data from various metrics which relate to the principles of ESG as mentioned above.

For more information on MSCI’s ESG research, please click here.

Morningstar also provide analysis on how ESG companies are, through the Morningstar Sustainability Rating. This can be found here. 

5 ESG companies to invest in, in 2022  

Please note this section of the blog is for informational purposes only and does not constitute financial advice. This section simply seeks to highlight 5 ESG companies that investors may have an interest in. Before making any investment decision, seek professional advice.  

Ranking	Company name	Sector	ESG Rating (MSCI)	Market Capitalisation (Billion USD)	IBD Composite Rating	IBD Relative Strength Rating
1	Salesforce	Software application	AA	276.3	99	91
2	Nvidia	Semiconductors	AAA	533.7	99	96
3	Microsoft	Software and infrastructure	AAA	2,208	94	82
4	Best Buy	Specialty retail	AAA	27.12	95	90
5	Pool	Leisure	AA	18.4	99	91

Data extrapolated from here.  

It is important to note that the potential merits and risks of investing directly into ESG stocks/direct equity. Many clients are more suited to ESG funds, structured products or ESG ETFs.

More information on the various ways in which clients can invest into the stock market can be found here. 

Want to ESG start investing?  

As part of deVere’s core objective of assisting clients with all elements of their financial planning, the company has launched several ESG projects. These have been designed to allow clients with a desire to invest in an ESG fashion or to simply learn more about ESG to do so.

Please click here to be put in touch with an advisor who can introduce you to suitable ESG investment solutions which are designed to have a positive impact.  

If you are new to investing or simply want to learn more about this topic, you will likely have several questions regarding how to structure your investments in an ethical way and how to balance your portfolio to achieve the best possible results.