A Beginner’s Guide to ESG Investing: How to Choose an ESG Fund

The events of the past year have only reinforced a trend toward investing in one’s values that has been steadily building over the past decade. While making the decision to invest in your environmental, social and governance values seems like a simple enough thing to do, how easy is it really? Where do you start? How do you pick the right fund for not only your ESG values but for your wealth-building goals as well? This paper seeks to provide that guidance by introducing the reader to tips and techniques to navigate the noise of ESG-themed mutual funds.

A brief history of the ESG investing world

While ESG funds seem like the latest thing in the investing world, they have actually been around in various forms for years, with many established ESG funds and fund managers dating back to the 1970s. The term ESG itself however, is relatively new, which contributes to the confusion. There have been funds focused on the environment, social responsibility and ethical values throughout the years that nowadays find themselves lumped under the ESG umbrella. The tables below show the recent growth in fund products and AUM to illustrate how this form of investing has exploded around the world.

The drivers of this expanding interest are many, but two in particular stand out: climate change becoming real and inequalities in the workplace and society at large. Both of these drivers gained even more traction from a general changing of developed world demographics that brought along a generational shift replete with new attitudes about issues such as these and their relation to how we conduct our lives and invest in our future. Together, these two issues in their various forms have come to dominate the mainstream press over the past five to 10 years, giving rise to investors finding ways to express their views and take part in driving change. Add to that the impacts of the COVID-19 pandemic with people hunkered down at home listening more closely than ever to the news and thinking deeply about the major social and natural events that are taking place.

So, ESG investing seems like a natural outlet for people feeling a bit helpless with all that is going on in the world and searching for a way to contribute to helping bring about change. But what exactly is ESG and what does it mean to invest in it? Download the full report here to find out more.