What is ESG investing?

ESG investing refers to the practice where investors consider environmental, social, and governance factors in their investment decisions. This approach emphasizes that these non-financial factors can have a significant impact on the performance and sustainability of investments over the long term. By integrating ESG criteria, investors aim to identify companies that are well-managed, socially responsible, and environmentally sustainable, which can lead to better risk management and potential opportunities for returns.

The correct choice highlights the role of investors in acknowledging the importance of these factors as part of their investment strategy. This acknowledgment leads to informed decision-making that considers not just financial metrics but also the ethical and sustainability practices of the underlying assets.

Other choices may misallocate the focus or terminology, mentioning aspects like "corporate decision making" or mixing up factors such as "economic." For instance, while understanding corporate governance is essential, ESG investing's primary focus is on how these factors influence investment decisions rather than just corporate actions. Each element within ESG—environmental issues, social impacts, and governance practices—are critical for long-term investment success and risk management, making the correct answer the most comprehensive and accurate representation of ESG investing.