Over a decades ago, the debate about ESG investing had been discussed by many industrial experts and NGO organizations. The criticism and protests have increased everywhere due to environmental pollution, social injustice, and deviant administration.

To overcome the bias and unethical conducts, the authorities had imposed several rules and policies to protect the environment, social justice and transparency in governance. ESG stands for Environmental, Social, and Governance.

How ESG Investing is Implemented?

When conducting business activities, the companies do ESG investing by evaluating and considering all risks and benefits before making any decision. The companies will have no doubt to strictly comply with all rules and policies to minimize the negative impacts on the environment.

These include to provide a safety working environment, worker health protection, fair treatment to people, non-profit contribution and other social responsibility. In providing good corporate governance, the companies also will be transparent in all management and financial activities.

Year 2020 – The Upward Trends in ESG Investing

Most of the companies are being serious in ESG investing after their heavy loss during Covid-19 lockdown. During this period, ESG stocks show its sustainability and outperform all asset prices in the market.

This makes companies and external investors realize the importance of ESG factors. It paid off the companies for long-term by strengthening their financial stability and becoming better in quality over its competitors.

As for external investors, outstanding ESG present in a company’s portfolio gives better confidence for them to invest in that company. Research has shown that ESG factors are preferred during the investing process by 76 percent of younger generations in the UK.

Major Challenges in ESG Investing

In ESG investing, environmental factors are qualitative and difficult to be measured by the companies. Besides, in providing good social contribution, human decision and action in the companies naturally involves emotion and tends to bias.

Whereas for governance, it is difficult to ensure transparency in management and financial activities all the time. For external investors, analyzing companies’ data and information requires a lot of time and will make them miss golden opportunities to invest at the right time.

How AI benefits ESG Investing?

Artificial Intelligence (AI) helps companies by collecting, analyzing, processing and filtering essential data from agencies, organization, institution and public reports in determining the level of risks and risks control toward environmental protection.

To ensure ESG investing success, AI also helps companies to improve their social judgment and contribution by using quantitative data, reports and results as the metrics to give fair rewards, fair treatment and excellent working safety.

AI also improves corporate governance in companies by using software and systems like Trello and cloud based accounting software. It will make upper management easily monitor daily business activities.

AI helps external investors to get enough important data and information quickly before making any long-term sustainable investing.

To summarize, ESG investing is the highest priority for all companies to ensure a nightmare like Covid-19 will never happen again and Artificial Intelligence (AI) makes it easier.