What is ESG investing?

At ABN AMRO, ESG investing is the standard. ESG stands for Environmental, Social, and Governance. But what does this mean for you as an investor, and how does it differ from sustainable investing?

What is the difference between sustainable investing and ESG investing?

Do you want to invest sustainably? Then it is important to know what actually qualifies as sustainable investments. According to European guidelines, a sustainable investment must meet these conditions:

The company in which you invest must contribute to achieving an environmental or social objective.
Additionally, the company must not have a negative impact on other environmental or social objectives. For example, investing in wind turbines contributes positively to an environmental objective, but if this occurs in a nature reserve, it negatively affects biodiversity.
The company must be responsibly managed.

If an investment meets these 3 conditions, we call it a sustainable investment. ESG investments satisfy some sustainability criteria, but not all the conditions required for sustainable investments.

What do E, S and G stand for

E: Environmental

For the ‘environmental’ part of the ESG factors, we examine the positive contribution a company makes in terms of environmental challenges and its performance in this regard. We look at the steps a company is taking to reduce carbon emissions, water usage and the amount of waste generated. We also ask questions like ‘Does the company actively recycle?’ and ‘Does the company report on its own environmental impact?’.

S: Social

For the ‘social’ aspect we look at how a company treats its employees. Does a company ensure working conditions are safe and pay its employees a fair wage ? Does the company have an anti-discrimination policy, for example? How does the company treat its suppliers? What is the company doing to exclude child labour from its manufacturing chain?

G: Governance

For the ‘governance’ aspect we examine how a company is managed, asking questions like ‘Is the company susceptible to corruption?’ and ‘What is the composition of the Supervisory Board?’. We also look into whether the company is involved in political lobbying and, if so, whether they have a transparent policy about this. And we consider how transparent the company is in terms of its policy and activities.

You're making different choices

At ABN AMRO, we routinely exclude certain investments, such as those in controversial weapons, coal mining, and controversial oil and gas extraction. While ESG investments might yield better returns over the long haul compared to non-sustainable ones, current market trends can sometimes negatively affect your ESG portfolio. For instance, if oil prices surge, it could impact your investments. Be mindful of that.

Why choose ESG investing?

ESG investing is gradually becoming the norm. It involves putting your money into companies that prioritize people, the environment, and society. We've listed 5 reasons why ESG investing is quickly becoming more popular.

Why invest in ESG

Investing involves risks

Investing involves risks. You could lose (some of) the money you invested. If you are going to invest, it is important that you are aware of this. Invest with money you can spare. Read more about the risks associated with investments.

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What is ESG investing?

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