What is ESG Investing? Does it Actually Outperform?

ESG investing is generally regarded as investments that consider economic, social, and environmental factors associated with companies. 

There are three core components of ESG investing 

This includes the effects of a company’s products and services on the environment, such as emissions, waste, and water usage.

1. Environmental 

This includes the effects of a company’s operations on employees, customers, and communities.

2. Social 

This includes ethical considerations such as corruption, bribery, and human rights abuses.

3. Governance 

One way of understanding whether ESG investing outperformance is valid or just based on lower risk is to compare it against indices that are assumed to be sustainable.

Does ESG Investing Outperform?

A study by Scientific Beta claimed that ESG investing does not offer downside risk protection that its proponents claim it does.

Flawed Underlying Analysis