Key factors to consider when choosing ESG stocks
Investing in ESG stocks is a bit different from other sectors. Investors typically choose stocks for financial reasons. If that explains why you're considering ESG stocks, then it makes sense to look into factors like revenue growth, profitability, and dividend yield, depending on your priorities as an investor.
However, if your priority is ESG, that puts you in a unique position among investors.
You'll want to decide which is the important component of ESG for you. If it's renewable energy, you'll want to prioritize companies that are energy-neutral or focused on renewables.
If the social mission, you may want to invest in companies with diversified boards and that are making efforts to support their local communities.
Governance may be harder to assess, but it's worth considering whether a company has stayed out of its regulatory trouble, how much voting power insiders have, and if its board of directors is independent from management.
Based on other ESG issues that are important to you, you may want to consider other factors, such as whether the company is a good employer.