• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer
The Impact Investor | ESG Investing Blog

The Impact Investor | ESG Investing Blog

Investing for financial return is only part of the equation.

  • ESG Investment Products
    • Best Impact Investing Apps
    • Best ESG Funds
    • Best Socially Responsible Mutual Funds
    • Best BlackRock SRI Funds
    • Best Vanguard ESG Funds
    • Best Sustainable Robo-Advisors
  • ESG Education
    • How to Build a Socially Responsible IRA Portfolio
    • ESG Principles
    • ESG Shareholder Activism
    • Why You Need ESG Investing
    • ESG Investing Trends
    • Social Impact Examples
    • Impact Investing Examples
  • Careers in ESG
    • Best ESG Jobs
    • Best Corporate Responsibility Jobs
    • Environmental Justice Jobs
JOIN

15 Reasons Why You Need ESG Investing

Updated on September 16, 2024

Our posts may contain links from our affiliate partners. This supports helps support the site as we donate 10% of all profits to sustainability organizations that align with our values. However, this does not influence our opinions or ratings. Please read our Terms and Conditions for more information.

ESG is a small acronym that represents a big idea. The idea is that big businesses, corporations, and even individuals should use non-monetary methods to reduce their impact on the environment. Typically, this is achieved through the proper use of material and energy impact and ethical or social impact in any given industry.

Governance is also important, being that it covers ethics, the rights of shareholders, and more. This is why ESG investing is important and why you should pay close attention when you plan to invest.

Table of Contents

  • Why is ESG Important in Investment?
  • 1- Sustainable Investing Is The Future
  • 2 – ESG Investing Can Help Mitigate Risk
  • 3- Good Governance Is Important To The System
  • 4 – Public & private Partnerships Have Expanded
  • 5 – Climate Change is A Reality
  • 6 – How & What We Consume Is Influenced By Emerging Tech
  • 7 – Social Media Is Driving The Market
  • 8 – Demographics Are Shaping The New Normal
  • 9 – Regulation is King
  • 10 – Global Value Chains Use ESG
  • 11 – People Are Sticking Around A Lot Longer
  • 12 – Energy Sources In The World Are Changing
  • 13 – Performance Is Why ESG Investing Is Growing
  • 14 – Investing Sustainably Drives Performance
  • 15 – Fund Companies Are Introducing High Numbers of Sustainable Funds

Why is ESG Important in Investment?

ESG or environmental, social, and governance covers topics that investors will need to research and consider before moving forward with any form of investment.

This can range from pollution prevention to resource management. It also covers the human aspect of an investment, such as paying a living wage, i.e., fair trade labor, and ensuring work conditions are safe, among other things.

Sustainability is perhaps one of the most important aspects of investing in the modern world, with more companies globally moving toward reducing their footprint. The impact of ESG investing can be seen in a global reduction in wastage and the surge in assets related to sustainable funds.

We have put together a list of several reasons why ESG investing is the way forward and why you should invest in ESG today.

See Related: Awesome Impact Investing Examples to Know

1- Sustainable Investing Is The Future

Sustainable investing is no longer an off-the-wall method, and it is a line of thought that is seen regularly in some of the largest investment firms. The future of sustainable investing is bringing, and the only way to do it properly is through ESG investing.

Many stakeholders and investors of all sizes have made substantial shifts towards the low-bond-yield and low-growth environment, which supports ESG investing over older forms.

See Related: History of Impact Investing: 8 Things to Know

2 – ESG Investing Can Help Mitigate Risk

Risk is always a factor when it comes to investments; however, ESG or sustainable investing can help with management. There is so much uncertainty in the world right now, but sustainable investing has proven to be an effective way forward.

ESG investing results in a company that has a lower chance of running into issues that cause negative press and labor problems, and boycotts are virtually non-existent. It helps to keep the bottom line in black while also putting forth a positive image in the press.

It also helps that ESG-focused investing has a trickle-down benefit and makes it easier for companies and investors to weather turbulent times more effectively.

See Related: How to Invest in Wind Energy | Best Wind Stocks

3- Good Governance Is Important To The System

In the US, the market crisis of 2008 opens the eyes of investors in both the private and the public sectors. It showed just how important it is for there to be proper governance in terms of conduct and culture in terms of investments.

Corporate governance has always been a topic that regulators paid attention to. However, the 2008 crisis highlighted just how important it actually is. For fixed-income investors, this has never been more true.

With ESG investing, governance and ethics play a big role in every decision-making each move is beneficial for all involved.

See Related: Environmental Justice Jobs

4 – Public & private Partnerships Have Expanded

The collaboration between the private and the public sector started out focusing on housing and infrastructure but has since evolved. Both parties are now deeply involved in both environmental and social issues making ESG investing even more critical.

A quick look at how the EU agency market and the US municipal market is working with the private sector proves how effective and beneficial social investments can be. With sustainable investing on an ESG investing model becoming the gold standard, there will soon be no limit to what a joint effort can produce.

See Related: Ways to Invest in Cobalt (Sustainably)

5 – Climate Change is A Reality

Climate Change Campaign

Globally, both governments and ordinary people understand the effects of climate change. In almost all cases, it is also acknowledged. ESG investing methods allow for mitigation techniques to be employed that put funding in the hands of those who are committed to making a change.

The COP21 Paris agreement is an international example of mitigation techniques being put in place to slow and eventually reverse climate change.

Private initiatives in the form of sustainable investment portfolios and effective ESG investing are ways that people, businesses, and investors of all sizes can contribute to making the world a healthier place to live. ESG investing also provides investors with a comprehensive disclosure of climate-related financial risks.

See Related: ESG vs SRI vs. Impact Investing: What’s the Difference?

6 – How & What We Consume Is Influenced By Emerging Tech

Technology is evolving, and a breakneck pace and ESG investing are behind much of the trends. Smart metering, electric cars, online sales, renewable energies, and so much more are becoming the norm instead of the exceptions.

Most sectors are experiencing a shift in the way businesses are run and in the products that are produced and sold for mass consumption.

Companies and brands with massive amounts of resources are more willing to adapt to the consumer’s will, which is on-trend to remain eco-focused and socially conscious.

See Related: How to Invest in Electric Car Charging Stations

7 – Social Media Is Driving The Market

You can see just how much social media power works by looking at its effects on investment. Social media plays a big role in how cultures and generations of people see the world around them and how they interact.

For investors, just having a flashy ad campaign is no longer enough. Brands, companies, and even governments have no choice but to pay heed to the demands of the common man for new regulations.

Ethical and social pressure can lead to sustainable investments, which further highlights the ESG investing impact.

See Related: Here’s How to Achieve Carbon Neutrality

8 – Demographics Are Shaping The New Normal

Baby boomers have been shaping the world for a few decades, but now Gen-X and Millennials are taking over the task of influencing what the world will become. ESG investing is being driven by these generations in a way that is shaping financial, business, and even governance landscapes.

For example, the green bond market is growing by leaps and bounds thanks to the younger generations’ backing of ESG and sustainable investing. In general, the field of sustainable finance has grown to match and surpass the traditional markets, and there is no sign of it slowing down any time soon.

See Related: Things to Know About Climate Refugees

9 – Regulation is King

If you want to know why ESG investing is so important, take a look at recent regulations on a global scale. New regulations are being put in place thanks to ESG considerations.

Nuclear power plants are being shut down, and some countries now have mandatory climate risk reporting mandates and even government agencies that govern subordinated financial debt.

These all increase the thresholds in financial institutions, making ESG investing one of the simplest paths to proper and unhindered growth.

See Related: What’s the Real Impact of Climate Migration?

10 – Global Value Chains Use ESG

Big corporations these days are global, which means that sourcing and value chains are also global. The interconnection is one of the reasons why ESG investing is so important. Value chains are highly complex and involved many players and hundreds of connected entities.

If you wonder what ESG investing really means, break down a value chain into its individual parts. If a value chain is poorly managed, not only is it costly to the corporation, but it also trickles down to being a bad investment and harsh on the environment.

Studies show how and why ESG investing works and that it can keep workers safe, the environment balanced, and keep emissions low to reduce the environmental impact.

See Related: Capitalism and the Environment: Are they Good or Bad for Each Other?

11 – People Are Sticking Around A Lot Longer

In the past, the average person would live to be only 60-70 years old. These days people are living much longer and staying active well into their advanced years. With the rise in life expectancy, sustainability issues will hit our children and many people who are alive now.

ESG investing is a way to combat poor governance, income inequality, climate change, and failing health care in a meaningful manner. Anything that directly affects financial and environmental security is something that should be on the top of your to-do list.

See Related: Map of Coal Power Plants in the US [Interactive]

12 – Energy Sources In The World Are Changing

Renewable Energy

Climate change is only one aspect of why ESG investing practices are so important. Another is the change in the energy markets. The dependence on fossil fuels has not only caused nations to go to war, but it also has begun to have a negative impact on our environment.

Drivers, governments, and carmakers are clearly telegraphing the demand and the supply.

While oil is still the top seller, there has been a dramatic shift to natural gas, thanks partly to the abundance and the lower cost. Renewable energy is now scalable and much easier to come by for all types of usages, from running cars to powering big industrial machines.

See Related: Investing in Carbon Credits: Do They Leave an Impact?

13 – Performance Is Why ESG Investing Is Growing

Performance is always going to be one of the driving factors in the field of investing. According to studies from many top financial firms, sustainable investing outperforms conventional forms of investment.

Nuveen TIAA, Deutsche Bank, Morgan Stanley, the United Nations, and many others know why ESG investing is so effective. With performance on the rise, investors are able to see it firsthand.

See Related: Reasons Why ESG Investing is Important

14 – Investing Sustainably Drives Performance

ESG investments have been proven to have good performance. Companies that practice sustainable investing are in the top quintile and outperform traditional investment by leaps and bounds. Social sustainability has turned out to be less volatile, with more than 75% of sustainable equity funds ranking among the top in their categories.

Conventional index funds are losing popularity and also have shown rather lackluster performance in recent years. According to recent investor surveys, the improved performance of ESG investments is what has led to the gradual switch over to sustainable investing.

See Related: Tesla Road Trip: 1,800 Miles in 3 Days (Case Study)

15 – Fund Companies Are Introducing High Numbers of Sustainable Funds

Another reason why ESG investing is so important is that every company is now getting into the game. Large fund providers such as Fidelity and Vanguard, among others, have launched many ESG products. Aside from the big names, there are a large number of new ESG funds hitting the market on a regular basis.

In the first 6 months of 2020 alone, over two dozen never before seen sustainable funds hit the market. For the past six years, the market has seen a minimum of 20 new sustainable fund launches each year, which will only increase as popularity grows.

The majority of funds also include ESG concerns in their investment process, which is as close to full conversion as can be expected for existing funds.

Related Resources

  • Best Impact Investing Books to Read
  • Benefit Corporation vs B Corp: What’s the Difference?
  • Important Pros and Cons of Electric Vehicles
  • Best ESG Rating Agencies
923d95e062b28f617965ee8eee7a115bc3a2913e65cff2bdf19668d7ac8b3174?s=100&d=identicon&r=g
The Impact Investor

Kyle Kroeger, esteemed Purdue University alum and accomplished finance professional, brings a decade of invaluable experience from diverse finance roles in both small and large firms. An astute investor himself, Kyle adeptly navigates the spheres of corporate and client-side finance, always guiding with a principal investor’s sharp acumen.

Hailing from a lineage of industrious Midwestern entrepreneurs and creatives, his business instincts are deeply ingrained. This background fuels his entrepreneurial spirit and underpins his commitment to responsible investment. As the Founder and Owner of The Impact Investor, Kyle fervently advocates for increased awareness of ethically invested funds, empowering individuals to make judicious investment decisions.

Striving to marry financial prudence with positive societal impact, Kyle imparts practical strategies for saving and investing, underlined by a robust ethos of conscientious capitalism. His ambition transcends personal gain, aiming instead to spark transformative global change through the power of responsible investment.

When not immersed in finance, he’s continually captivated by the cultural richness of new cities, relishing the opportunity to learn from diverse societies. This passion for travel is eloquently documented on his site, ViaTravelers.com, where you can delve into his unique experiences via his author profile. Read more about Kyle’s portfolio of projects. 

  • Facebook
  • Twitter
  • Email

Filed Under: ESG Investing

Primary Sidebar

Start ESG Investing

Best Impact Investing Apps

Best ESG Investment Funds

ESG Investing Trends

What are the Core ESG Principles?

Investment Product Reviews

Earthfolio Review

Betterment SRI Review

Axos Invest Review

Nutmeg Review

Wealthfront SRI Review

Recent Posts

  • 11 Most Carbon-Friendly AI Companies Leading the Sustainable Technology Revolution
  • ESG/Impact Investing vs. Traditional Investing: 9 Data-Backed Performance Insights for 2025
  • 9 Critical Impacts of Trump’s DEI Policies on Sustainable Investing
  • How to Choose Sustainable ETFs: Step-by-Step Guide
  • Green Bonds vs Sustainable ETFs: Complete Analysis
Polar BearPolar Bear on Ice on Ice

Future Generations Will Thank You

Join the newsletter and learn how you can make a invest for financial return and make a positive impact.

JOIN NOW

Footer

About

The Impact Investor is a blog focused on helping retail investors find ESG, socially responsible, and impact investment opportunities through our expert insights, tips, and blog posts.

Resources

  • Best ESG Jobs
  • Best ESG Stocks
  • Best EV Battery Stocks
  • Best ESG Analysis Tools
  • How to Finance Solar Panels

Tools

  • Tesla Charging Calculator
  • Solar Loan Calculator
  • PACE Loan Calculator
  • Electric Bill Calculator

Products

  • Best Investing Apps
  • Best Robo-Advisors
  • Best ESG Funds
  • Vanguard ESG Funds
  • Best Green Credit Cards

Marketplace

  • Community Solar Providers
  • Best Car Insurance for EVs
  • Best Home Solar Systems
  • Best Green Auto Loans

Contact

  • About
  • Contact Us
  • Privacy Policy
  • Disclaimer
  • Facebook
  • Instagram
  • Twitter
  • YouTube

Copyright © 2025 The Impact Investor