-
Commitment to our readers
18 years
Helping you save money
Reviewed
by experts
Cited by
major publications
Finder maintains full editorial independence to ensure for our readers a fair assessment of the products, brands, and services we write about. That independence helps us maintain our reader's trust, which is what keeps you coming back to our site. We uphold a rigorous editorial process that ensures what we write and publish is fair, accurate, and trustworthy — and not influenced by how we make money.
We're committed to empowering our readers to make sound and often unfamiliar financial decisions.
We break down and digest information information about a topic, product, brand or service to help our readers find what they're looking for — whether that's saving money, getting better rewards or simply learning something new — and cover any questions you might not have even thought of yet. We do this by leading with empathy, leaning on plain and conversational language that speaks directly, without speaking down.
What does ESG stand for?
ESG stands for environmental, social and governance. Here’s what that means:
E is for environmental
The environmental side of ESG measures how the company affects the planet through various aspects, including energy use, natural resource conservation, animal welfare, waste and pollution.
S is for social
The social aspect of ESG covers the company’s relationship with suppliers, customers, employees and the community. This includes employee gender and diversity, customer satisfaction, human rights and fair labor practices.
G is for governance
The governance side of ESG covers how the company is run, including company leadership, executive pay, eternal controls and shareholder rights.
3 reasons you should care about ESG investing
Investing in ESG stocks may not seem like a big deal. But it can have a noticeable impact on your portfolio.
1. Reduced portfolio risk
If a company implements the ESG policies, chances are low that it will be hit by a lawsuit from its employees, customers or even the government.
For example, Tyson Foods is a company that saw numerous lawsuits filed against it in 2021 for allegedly misleading shareholders about the company’s ability to combat the spread of coronavirus in its facilities. This dropped the stock price by 8% in the days following the news about the lawsuits. If the company fully implemented the ESG policies, this likely wouldn’t have happened.
2. Potentially higher returns
You may find claims online that ESG-friendly companies tend to perform better than those that don’t follow ESG policies. This could be true in the long run. However, the performance may also depend on who’s tracking it. Three agencies that track and rank companies based on ESG policies have shown different results, according to one Wall Street Journal article.
For example, Refinitiv showed that companies with poor ESG scores performed better in 2021 than companies with high ESG scores. On the other hand, companies ranked by Sustainalytics showed that those with average ESG scores performed better than those with high and poor scores. Finally, companies ranked by MSCI that had high ESG scores outperformed those with poor scores.
3. Strong corporate leadership
Companies that follow ESG rules in general tend to have strong leadership. This can positively affect company stock performance.
2 benefits of ESG investing
Choosing a company based on its ESG policies may come with some benefits, including:
- Lower risk of lawsuits. Because the company is trying to meet the ESG criteria, chances are it will avoid lawsuits on fronts covered by the ESG standards.
- Popularity. Companies that implement ESG standards are often published in annual reports by companies such as Goldman Sachs, Wells Fargo and JPMorgan Chase, which can drive interest for investing in ESG companies.
2 drawbacks of ESG investing
Despite having some positive sides of ESG investing, there are some things to keep an eye on.
- Lack of ESG ranking standards. Multiple companies track and rank companies based on their ESG policies. This can create inconsistency as not every company would be ranked the same, which may cause investor confusion.
- It can be misleading. Companies can game the system by ranking high on one or two of the ESG parts. For example, an oil company ranks poorly on the environmental side, but it can boost the social and governance parts to get a high ESG score.
ESG vs. socially responsible investing
Socially responsible investing (SRI), also known as ethical investing, is an investment strategy that, aside from financial gain, is focused on companies that practice social responsibility and bring social change.
ESG, on the other hand, is a framework by which companies are ranked. The main difference between ESG investing and SRI is that some investors that follow the latter avoid companies that are involved in tobacco, firearms, gambling, fast food, pornograhy and fossil fuel production.
Socially responsible investing:
an investing strategy that aims to generate both social change and financial returns for an investor.
3 steps to start ESG investing
Investing in ESG companies and funds is simple. Here’s how to do it:
1. Figure out what ESG and social responsibility means to you
If you want to invest in companies that share your values for climate change, employee diversity or any other environmental and social value, investing in ESG may be the right option. When you compare stocks, see how the companies rank on each of the ESG values to choose the one you like the most.
2. Choose to DIY or go with a robo-advisor
There are two ways to invest in ESG companies: finding the companies by yourself or through a robo-advisor. The first option means you have to do the research yourself.
The second is more of a hands-off approach. Betterment and M1 Finance are two popular robo-advisors that allow you to choose socially responsible companies for your portfolio. Once you set your criteria, the algorithm allocates your funds.
3. Find the right ESG company and invest
Now that you know what to look for, here’s how to invest in the right company:
- Research ESG stocks. Start by searching the companies online or through your broker.
- Open a brokerage account. Some brokers, such as Interactive Brokers, show an ESG score for each company that’s ranked. If you don’t have a brokerage account, consider one that provides ESG scores.
- Fund your account and buy the stock. Once you have the funds, go ahead and buy the companies you want.
ESG ETFs
Investing in exchange-traded funds (ETFs) is another option to get exposure to ESG companies. An ESG ETF is a basket of companies that follow ESG criteria, which can sometimes be a better alternative than investing in individual stocks.
Save money on transaction costs with ETFs because you hold multiple companies with a single transaction. Also, with ETFs, you don’t have to do a lot of research to find the right company —- the fund has already done that for you.
Compare stock trading platforms
If you’re ready to start investing, the first step is to sign up with a broker. See how these platforms stack up against one another before you choose.
What is the Finder Score?
The Finder Score crunches 147 key metrics we collected directly from 18+ brokers and assessed each provider’s performance based on nine different categories, weighing each metric based on the expertise and insights of Finder’s investment experts. We then scored and ranked each provider to determine the best brokerage accounts.
We update our best picks as products change, disappear or emerge in the market. We also regularly review and revise our selections to ensure our best provider lists reflect the most competitive available.
Paid non-client promotion. Finder does not invest money with providers on this page. If a brand is a referral partner, we're paid when you click or tap through to, open an account with or provide your contact information to the provider. Partnerships are not a recommendation for you to invest with any one company. Learn more about how we make money.
Finder is not an advisor or brokerage service. Information on this page is for educational purposes only and not a recommendation to invest with any one company, trade specific stocks or fund specific investments. All editorial opinions are our own.
Ask a question
More guides on Finder
-
Best Paper Trading Apps to Practice Trading With Fake Money in 2025
Some of the best paper trading apps to practice stock trading with fake money include Interactive Brokers, eToro, Charles Schwab and more.
-
What is brokerage cash and how can I use it?
Find out more about this component of your brokerage account and how you can use this cash.
-
7 Best Day Trading Apps of 2025
These are the best day trading apps, according to Finder’s comprehensive analysis.
-
5 Best International Stock Brokers to Invest in Foreign Assets
Want to buy and sell international stocks? Here are the top brokers to help you trade global markets.
-
9 Best Discount Brokers of 2025 for Low-Cost Trading
These are the best discount brokers of 2025 according to Finder’s comprehensive review.
-
5 best stock picking services of 2025
Compare the 5 best stock picking services, according to Finder’s analysis, and learn how to choose the best option for your needs.
-
10 Best Stock Apps of 2025 to Elevate Your Mobile Trading
Check out our picks of the best trading apps for beginners, options traders, hands-off investors and more.
-
Public.com Review 2025: No-Fee Options, With Rebates
A beginner-friendly investing platform with fractional shares and no commissions on stocks and ETFs.
-
10 Best Brokerage Accounts for Trading and Investing in 2025
See our picks of the best brokerage accounts, including Fidelity, SoFi, Charles Schwab, Public, Robinhood and E*TRADE .
-
How to invest in the S&P 500 in 2025
What you need to know about investing in the leading indicator for the overall US stock market.