If you have money to invest you sure will want to invest in a company with a good environmental, social, and governance (ESG) record. New research has revealed that companies that have strong ESG policies become more profitable. The traditional arguments for good ESG policies are based on good public relations, worker retention, and that it’s just the right thing to do. Now people championing ethical capitalism through ESG have another argument to make.
Infosys research found that a 10-percentage-point increase in ESG spending correlated to a 1-percentage-point increase in profit growth. This occurred relatively quickly: 41% of respondents surveyed said they experienced a return on their ESG investment within a two- to three-year window.
ESG efforts include looking at how much renewable energy a company might purchase and at cutting greenhouse-gas emissions, even going all the way to net-zero emissions, and as a result, lowering energy bills. Other efforts might focus on bringing more women or people of color on as board members and can even inform the “G” in ESG — governance. Good governance might include transparency with shareholders or linking CEO compensation to progress in the “E” and the “S” areas.