What ESG Metrics Really Matter? Dividend.comWhat ESG Metrics Really Matter? Dividend.comWhat ESG Metrics Really Matter? Dividend.com
Impact Investing Forum 2024
London. April 24-25, 2023.
These issues can be solved by using newer and more relevant ESG metrics. Electric companies might create a hybrid ESG metric that measures the ratio of EBITDA and carbon intensity. This could be used to compare utilities in the industry to identify those that are making a profit shifting to renewable energy. Ratings companies and funds might change the way they aggregate these metrics. For example, a company that performs well in one area should not be eligible for ‘ESG’ if its performance in another area is poor. Companies can also be disqualified for negative externalities by using market failure metrics. These include consumer health and deforestation. Some funds actively invest in companies that are able to effect positive change, rather than excluding negative companies. The iShares MSCI Global Impact ETF, (SDG), invests in companies that generate revenue from products or services that address at most one of the most important social and environmental challenges in the world.
How to Invest In ESG Now Investors who are looking to better align their portfolio with their values have a few options. Engine No. 1 Transform 500 ETF(VOTE) invests at least 500 of the largest U.S. corporations and uses its influence to elect proxies. Famously, the firm succeeded in replacing ExxonMobil board member to enforce structural change. ESG investments can also be made through impact investments such as the iShares MSCI World Impact ETF (SDG). SDG’s largest holdings are Tesla Inc. (TSLA), Vestas wind Systems (VWDRY), Umicore SA(UMICF), and other companies that have a positive impact, rather than companies that are making a negative one. Green bonds, which are not just ESG exclusionary but also impact investing, are another example. By investing in municipal bonds that finance solar projects, investors directly affect the affordability and implementation. This means that there is less risk of bonds with negative externalities.