ESG stands for Environmental, Social, and Governance, and ESG funds are investment funds that consider these factors when selecting companies to invest in. ESG investing offers a way for investors to align their portfolios with their personal values and concerns, such as climate change, social justice, and corporate responsibility. ESG funds can be either actively managed or passively managed, and they can invest in stocks, bonds, or a combination of both.

Some ESG funds follow an exclusionary strategy that omits companies that dont meet certain ESG criteria, while others invest in companies with leading or improving ESG practices. ESG funds are not individual stocks, but rather a collection of multiple stocks grouped together, which can decrease risk since a fund holds shares of many companies rather than just one.

Studies have shown that ESG funds can perform as well as or better than traditional funds in terms of financial returns, and that they often outperform them. However, it is important for investors to check an ESG funds mission and holdings to ensure that it aligns with their personal goals and values.

ESG investing is sometimes referred to as sustainable investing, responsible investing, impact investing, or socially responsible investing (SRI) . The financial industry uses many different terms to describe these approaches to investing, and ESG has become one of the most widely used.