With the rising popularity of ESG (environmental, social, and governance) investing, some investors are looking for ways to build a responsible portfolio while avoiding funds that focus solely on ESG criteria. Although ESG strategies can provide social and environmental benefits, they may not be suitable for all investors. Non-ESG investments can allow investors to align their portfolio with their values while still capturing returns. This article explores the best non-ESG investment options for investors who want to invest responsibly without limiting themselves to ESG-only funds.
Seeking funds with strong corporate governance
One way to invest responsibly while avoiding strict ESG funds is to seek out funds that emphasize strong corporate governance. Look for funds that analyze how companies treat shareholders, board independence, executive compensation, and transparency. Strong governance can benefit all investors while avoiding some of the limitations of ESG-only funds.
Choosing active managers with long-term focus
Actively managed funds with managers focused on long-term, sustainable performance tend to avoid risky companies and consider a firm’s impact on society. While not explicitly ESG funds, these strategies help align values and returns. Looking for low turnover, patient managers applying a business quality filter can allow non-ESG funds to meet social objectives.
Investing in funds with positive screens
Some non-ESG funds utilize positive screening to seek companies making measurable progress on social and environmental issues. For example, funds may invest in companies with good labor practices or environmental records without the full ESG label. Positive screens allow non-ESG funds to invest responsibly.
Allocating to thematic strategies
Thematic non-ESG funds targeting areas like healthcare, education, and financial inclusion promote positive change without solely using ESG criteria. Allocating specifically to themes with social benefits allows investors to align capital with values beyond traditional ESG strategies.
Non-ESG funds can align with investor values through solid corporate governance, positive screening, thematic allocation, and patient active management. Investors seeking responsible portfolios without ESG’s potential limitations have solid options.