Intelligent Investing #73 Glenn Leest, What is ESG?

Intelligent Investing with Glenn Leest

What is ESG?

• Environmental: This includes factors such as a company's impact on the environment, its use of natural resources, and its emissions of greenhouse gases.
• Social: This includes factors such as a company's labor practices, its treatment of employees, and its impact on the community.
• Governance: This includes factors such as a company's corporate governance structure, its executive compensation, and its transparency.

How is ESG Measured?

• Climate change: This is one of the most important ESG factors, as it has the potential to have a significant impact on businesses and the economy. Companies that are taking steps to reduce their carbon emissions and mitigate the effects of climate change are seen as being more ESG-friendly.
• Labor practices: This includes factors such as a company's treatment of employees, its wages and benefits, and its commitment to diversity and inclusion. Companies that have strong labor practices are seen as being more ESG-friendly.
• Human rights: This includes factors such as a company's impact on human rights, its supply chain practices, and its commitment to ethical sourcing. Companies that respect human rights are seen as being more ESG-friendly.
• Governance: This includes factors such as a company's corporate governance structure, its executive compensation, and its transparency. Companies that have strong governance practices are seen as being more ESG-friendly.

The Cons of ESG

• ESG investing can be more expensive: ESG funds often have higher fees than traditional funds. This is because they require more research and due diligence to identify and select ESG-friendly companies.
• ESG investing can be less diversified: ESG funds may be more concentrated in certain sectors or industries, which can increase risk. For example, an ESG fund that focuses on renewable energy may be more exposed to the risks of the solar or wind power industries.
• ESG investing can be subjective: There is no single definition of ESG, and different investors may have different interpretations of what it means to be environmentally and socially responsible. This can lead to confusion and inconsistency in the market.
• ESG investing can be difficult to track: ESG data is often not as standardized as traditional financial data. This can make it di

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