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Back to Basics: What is ESG?

Antonia Iacurci, aged 6, asks Morningstar analyst Elizabeth Stuart about ESG investing and why it's becoming more popular

Holly Black 01 November, 2019 | 9:23

Antonia Iacurci: Hello, I'm Antonia Iacurci. This is Elizabeth Stuart. Today, we are talking about ESG. What is ESG?

Elizabeth Stuart: Yeah, good question. So, ESG stands for environmental, social and governance. And basically, if we only want to invest our money in good companies, these are the tests that we put them through to see how good they are. So, environmental, these are the things that we want to check on to make sure that the company maybe doesn't contribute too heavily to climate change, or that they don't damage our natural environment. Social refers to, we want to ask, do they pay their staff well, do they treat them well, do they make it a safe and a pleasant place to work in and also, do they give equal opportunities to all different types of people in society? And then governance is about the bosses. So, do we trust them, do we think that they're honest, do we trust them to make good decisions? And then, if a company does well on all these tests, then we'd say that they're a good company, they're a sustainable company, and that they're likely to stick around for a long time and give us stable profits over time.

Iacurci: Why is it important?

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About Author

Holly Black

Holly Black  is Senior Editor, Morningstar.co.uk

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