Interested in environmentally and socially conscious investing? Here's what you need to know

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Or, maybe you just want to invest in companies that are taking steps to protect their bottom line from the very real business risks posed by climate change or social inequities.

Either way, you’re probably not eager to lose money. So you’d like to make investments that deliver a competitive return over time.

That’s a balance so-called ESG mutual funds are trying to strike.

The ESG acronym stands for environmental, social and governance issues — all of which face public companies and their stakeholders, which include investors, customers, employees and the communities where a business operates.

Thanks to growing demand, there are far more ESG funds today than a decade ago. A recent survey — by JUST Capital and partner organizations — found that “Americans overwhelmingly support public disclosure on human capital and environmental impact metrics from America’s largest companies, and endorse federal action to require standardized disclosure.”

Here’s what you need to know before investing:

What constitutes an ESG fund?

Rather than sort through individual companies’ commitments to ESG goals, most investors will outsource that task to an ESG mutual fund.

But ESG funds can differ in ways big and small. And not all of them will align with your biggest environmental, societal or governance concerns.

“ESG means so many different things to so many different people,” said Alyssa Stankiewicz, a sustainability analyst with Morningstar Research Services LLC.

So before investing in an ESG fund, at the very least read the principle investing strategy page in the fund’s prospectus to see what the investing priorities are, Stankiewicz recommends.

Know, too, there is no single set of ESG metrics against which every fund manager assesses a company — or which companies use to assess themselves when making ESG promises.

Also, managers will not necessarily give equal weight to all three components of ESG when deciding what to include in their portfolios.

Environmental concerns are likely…

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Source : cnn