California investors have nearly limitless options when it comes to deciding what to do with their money. Some decide what to invest in based on company goals. A relatively new type of investor is one who picks companies based on environmental, social, and governance-related factors. If these types of companies interest you, it’s good to know how to spot companies displaying these distinct qualities.
Governance is a concept that’s also applicable to value-based investors. Investors focusing on governance prefer companies that promote clarity and transparency, especially to their shareholders instead of a board of directors or executives. Companies with a focus on governance also tend to keep their employees well-informed.
Characteristics of companies with good governance include:
- Diverse teams
- Transparent accounting
- Shareholder voting rights
- Ethical business practices
- No regulatory history
ESG investors also look for companies that reduce their carbon footprints by adopting environmentally friendly business practices. Companies that fit this criteria:
- Use green technologies
- Reduce greenhouse gas emissions
- Conserve natural resources
- Follow environmental law
- Support other companies with like-minded environmental goals
- Maintain good recycling and sustainability practices
Lastly, ESG investors also look for companies focused on making positive social impacts. In recent years, investors and consumers are supporting companies focusing on following good social responsibilities. These investors judge a company’s social impact based on the following factors:
- How it pays employees
- What perks employees have
- If it employs a diverse range of people
- A history free from lawsuits and consumer complaints
- A no-tolerance stance on employee harassment
Many successful and wealthy investors recommend investing in companies you know and support. Use the previously mentioned factors to find investment opportunities fitting your ESG portfolio.