Imagine if you could align your investment portfolio with your values and contribute to a sustainable future – without compromising your financial goals.
That’s where Environmental, Social and Governance (ESG) investing comes in.
In 2025, global investor demand for ESG remains strong. According to Yahoo Finance, the ESG investing market was valued at $27,480 billion in 2023 and is projected to reach $130,880 billion by 2032.
Moreover, figures published by the Association of Investment Companies reveal that in 2024, almost half (48%) of private investors were considering investing in ESG.
If you’re interested in making your finances more sustainable but you’re unsure how to get started, this beginner’s guide to ESG could be just what you need.
ESG investing aims to support responsible business practices while also seeking financial returns
Ethically minded investors consider both ESG factors and traditional financial metrics when building their portfolios.
There are three core elements of ESG investing:
- Environmental – How a company manages its impact on the environment. Key metrics may include carbon emissions, water usage, and waste management.
- Social – How a company relates to employees, customers, suppliers, and the wider community. Key metrics may include human rights policies, consumer protection, and employee health and safety.
- Governance – How a company is led and overseen. Key metrics may include shareholder rights, board structure, and transparency.
3 compelling benefits of ESG investing
There are several reasons why you might want to consider adding ESG investments to your portfolio. Here are three:
1. Improved risk management – Companies that prioritise ESG factors may be better prepared to mitigate risks associated with events such as labour disputes, changes in environmental regulations, evolving societal expectations, and market volatility.
2. Potential for enhanced portfolio performance – A review by Morningstar has revealed that its Global Sustainability Index outperformed conventional counterparts over one-, three-, and 10-year periods. This may be in part due to the cost savings ESG companies typically make from their operational efficiency, regulatory compliance, and lower employee turnover.
3. Contribute to sustainability – Growing investor demand for ESG could encourage companies to prioritise initiatives such as carbon offsetting and sourcing renewable energy. So, by investing ethically, you could contribute to a healthier environment and workforce, both of which are essential for continued business growth and the sustainability of our planet.
How to get started with ESG investing
If you’ve not invested in ESG before, it may seem like there’s a lot to learn. So, here are our top tips for getting started.
Assess your values and priorities
As demand for ESG has risen in recent years, the number of investment opportunities available has increased significantly.
While this choice gives you greater flexibility to align your finances with your values, it could feel overwhelming.
Narrow down your options by deciding which ESG factors matter the most to you. For example, you might want to focus on companies that support climate action or those with strong policies on social justice.
Research funds and companies
Once you know where your priorities lie, you can start looking for funds and companies that share your values.
Unfortunately, there are no universal, standardised ESG metrics. However, you might find it helpful to refer to ESG reporting standards and frameworks that companies often follow, such as the SASB, GRI, and TCFD.
Some of the most common indicators of a commitment to ethical business are:
- Environmental metrics – Greenhouse gas emissions, energy consumption, waste management, water usage efficiency, air pollution, and biodiversity impact.
- Social metrics – Diversity and inclusion, employee engagement and wellbeing, human rights, and community relations.
- Governance metrics – Taxes paid, diversity of the board, business ethics, shareholder rights, and alignment of salaries with corporate performance.
You can find this information on company websites or by using specialised ESG data providers such as MSCI, S&P Global, and Bloomberg. There are also some public databases which may provide valuable insights, such as the Carbon Disclosure Project.
Understand the different types of ESG investments and strategies
There are many different vehicles for investing in ESG.
For example, an ESG mutual fund pools money from many investors to create a large, diversified portfolio which is professionally managed. Mutual funds are priced and traded once a day, when the market closes.
In contrast, exchange-traded funds (ETFs) are typically passively managed and can be traded on stock exchanges throughout the day.
You can also choose from a variety of ESG investment strategies, such as “negative screening” and “positive screening”. The former excludes companies or industries that don’t meet your chosen ESG standards, and the latter selects the ones that excel in ESG areas.
As you can see, there are a lot of options to consider. So, if you’re a complete beginner, you may benefit from speaking to a financial planner who can explain the different ESG vehicles and strategies in jargon-free language.
Be mindful of greenwashing
There has been growing concern over “greenwashing” in recent years. This occurs when companies inaccurately or selectively report their ESG performance to boost their ethical credentials.
There are several ways to avoid being caught out by greenwashing:
- Take your time to thoroughly research any new opportunity
- Look for reports that have been audited by a third-party
- Use established platforms to gather ESG ratings
- Check for consistency across reports
- Seek professional financial advice.
Get in touch
If you’re eager to get started with ESG investing and would like some expert guidance, we can help.
Please get in touch by emailing info@lloydosullivan.co.uk or call 020 8941 9779 to see how we can assist you.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
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