Environmental, Social, and Governance (ESG) investing has moved from a niche interest to a mainstream strategy in the UK. As more investors seek to align their values with their portfolios, understanding the essentials of ESG investing is increasingly important.
What Is ESG Investing?
ESG investing evaluates companies not just on financial metrics, but also on how they manage environmental impact, social responsibility, and governance standards. This includes carbon emissions, labour practices, diversity, and board independence.
Why Is It Growing in the UK?
UK investors, particularly younger generations, are prioritising ethical considerations. Regulations, such as the UK’s Task Force on Climate-related Financial Disclosures (TCFD), are also pushing companies to be more transparent about ESG risks, making data more accessible.
Performance and Returns
ESG funds used to be seen as sacrificing returns for ethics. Now, many perform competitively or even outperform traditional funds, especially during periods of market stress, as ESG-compliant companies often show better risk management.
How to Invest in ESG
You can invest through ESG-labelled ETFs, mutual funds, or even individual stocks. Platforms now allow you to filter options by ESG score. It’s important to research how a fund defines and scores ESG to avoid “greenwashing.”
Future Trends
In 2025, we expect more standardisation in ESG ratings, greater regulatory oversight, and increased demand. As awareness grows, ESG investing will likely become a default expectation for many UK investors.