ESG investing is one of the hottest trends today, with investors turning to ESG-related assets as a way to identify long-term investment gems or to stay off potentially risky assets.
As the ESG trend grows, multiple trading platforms, financial institutions and corporates have integrated market-leading sustainability solutions. This includes multi-asset investing platform eToro.
This article looks at what ESG investing is, how eToro’s ESG scores work and how an investor can follow the latest stock market news and tap into the insight from these ratings to make informed investment decisions.
What is ESG investing?
The acronym ESG stands for Environmental, Social, and Governance, which together represents a company’s non-financial related aspects that can impact market performance.
Broadly, ESG investing looks at an organisation’s rating on sustainability, ethical and accountability among other non-financial indicators, using insight from a given score screen particular investment assets.
An ESG score is a numeric rating assigned to a company following evaluation on the three categories:
- Environmental – corporate policies on emissions, waste management and resource utilisation.
- Social – company’s culture and outlook on things like labour rights and customer engagement.
- Governance – corporate leadership and governance on aspects such as transparency and accountability.
How does eToro get ESG scores?
eToro uses ESG scores provided by ESG Book, a leading digital platform for ESG data. The provider leverages cutting edge technology and proprietary research touching on 450 ESG metrics per company.
Experts analyse and process millions of ESG data points each day, with AI technology helping bring out comparable and transparent sustainability metrics that investors can trust.
The ESG Score is an aggregate of the hundreds of sustainability metrics, which are sourced from a company’s reports, news signals from across the globe and NGO data on 400 ESG topics.
On eToro, you can access ESG scores for more than 2,700 assets, with three colours helping investors to easily screen assets – green highlights top ESG scores, amber indicates average ESG scores and red suggests a poor ESG rating.
Do you want to see the ESG scores of top company stocks? Visit eToro.
Why are ESG scores important?
ESG scores can offer key insight into a company’s Environmental, Social and Governance outlook – in short, the risks and opportunities that an investor might not find from a company’s traditional financial reports.
Investors can use ESG scores as part of their investment decisions, using them to supplement traditional financial analysis.
If you are wondering whether eToro is good for beginners looking to get into ESG investing for the first time, then the company’s user-friendly interface, guides and display of ESG scores ensures this.
As noted earlier, investors looking to start ESG investing can also use ESG scores to filter what assets to add to their portfolio – particularly by monitoring given flags alongside the given rating.
Focusing on trusted data relating to these factors helps to spotlight risks and opportunities associated with a particular stock. A company whose ESG scores suggest it’s more resilient to non-financial risks arising from above issues is considered more sustainable and thus more attractive as a long term bet.
Conclusion
ESG scores offer insights into companies and thus their stocks and potential long term performance based on the impact of non-financial risks. eToro displays ESG scores of over 2,700 companies using trusted ratings from ESG Book.
Investors are increasingly looking to ESG investing as various issues around environmental, social and corporate governance emerge. However, while it is a big trend today, it is important to note that ESG scores alone don’t mean stock A is a good investment and stock B isn’t.