Aligning Values and Investments: ESG investing makes clear that investors may now line up their investment portfolios in accordance with personal or organizational values. An investor could now invest in organizations that resonate either with environmental responsibility, or social justice, or indeed ethical leadership.
Improve risk management: ESG criteria have come to be recognized as important instruments for risk mitigation. Organizations that fail to pay heed to ESG factors are most likely to face regulatory penalties, reputational loss, or operational disruption. A firm with weak environmental practices would be liable for fines or the cost of cleanup, whereas a firm with weak governance is prone to scandals or leadership instability.
Companies that employ good ESG practices usually end up outperforming their counterparts over the long haul. Such companies tend to be more responsive to regulatory change, more attentive to the concerns of their stakeholders, and better placed to benefit from a changing market context. Therefore, an emphasis on ESG within the portfolio is likely to add to its stability and robustness