ESG Investing
Definition
Environmental, Social, and Governance investing — incorporating non-financial factors into investment analysis and decision-making.
Explanation
ESG investing has grown from $30 trillion in 2018 to over $40 trillion in 2024, representing roughly one-third of global assets under management. Environmental factors include carbon emissions and climate risk. Social factors include labor practices, diversity, and supply chain ethics. Governance factors include board independence, executive compensation, and shareholder rights. The debate continues over whether ESG improves financial returns (proponents cite lower risk) or reduces returns (critics cite constrained opportunity set and values-based exclusions).