Environmental, social and governance (ESG) factors are playing an increasingly important role in how portfolios are managed and evaluated as investors aim to align financial growth with sustainability and ethical practices. For companies, this shift presents a chance to attract conscientious investors—but it requires them to adapt their operations, reporting and strategies to meet new expectations.
To that end, 18 Forbes Finance Council members share their insights on how ESG investments impact portfolio performance and risk—and how companies can better prepare for them. Their perspectives provide actionable strategies for integrating ESG principles into business practices so you can position your organization for success in a changing market.
1. Tap Into The Green Economy
The green economy represents a trillion-dollar addressable market. To benefit from this new revenue opportunity, companies are adapting their product lines and evolving their operational practices. Preparation requires evaluating intellectual capital, reinvesting in new infrastructure and aligning product strategy with changing consumer preferences. – Martin Jarzebowski, CFA, Federated Hermes
2. Establish Clear ESG Commitments
Because many investors prefer defined sustainability measurement along with their overall asset performance, companies with strong ESG beliefs are good at attracting long-term investment support. Preparation based on solid data reporting, clear communication and firm stakeholder commitment in ESG can lead to higher levels of investment interest. – Jeffrey Bartel, Hamptons Group, LLC
3. Connect Operations With Sustainability Expectations
By lowering long-term risks associated with environmental, social and governance concerns—and possibly raising profits from sustainable growth sectors—ESG-focused investments can improve portfolio performance. Companies should prioritize transparent reporting, incorporate ESG measurements into financial planning and connect operations with investor sustainability expectations to get ready. – Jared Weitz, United Capital Source Inc.
4. Create Real-World Value
ESG-focused investments, when done right, can fuel innovation and uncover massive opportunities while minimizing long-term risks. It’s not just about checking boxes—it’s about creating value by solving real-world problems. Companies need to think big, embed ESG into their core strategy and build solutions that scale. Focus on impact, not optics, and the returns will follow. – Shivali Kukreja , NIB NZ
5. Align Capital With Sustainability Goals
Companies with strong ESG practices are often eligible for green bonds or sustainability-linked loans with favorable terms. This boosts portfolio returns while lowering default risks. Companies should establish robust ESG certifications, engage in green initiatives and align their capital structures with sustainability goals. – Neil Anders, Trusted Rate, Inc.
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6. Conduct Frequent Impact Assessments
Diversifying an investor portfolio with ESG investments boosts performance by reducing risks tied to environmental, social and governance challenges while promoting sustainable growth and resilience during market volatility. To prepare, companies should integrate ESG metrics into their strategies, perform regular impact assessments and maintain transparency to meet stakeholder expectations. – Nike Ajao, OneBarrow Corp.
7. Consider ESG ETFs
Investing in sustainable ESG companies, whether related to your company or your suppliers, has many benefits all around. However, if your core strength is not on the investment front, your company may want to consider investing in an ESG ETF. This will give you all the marketing and profitability benefits while mitigating the risks and fees involved in building your own portfolio. – David T. Nudelman, Scandinavian Capital Markets
8. Prioritize Sustainability For Long-Term Value
ESG-focused investments can significantly impact a portfolio’s performance and risk. One way ESG factors influence portfolio performance is through the long-term value creation of companies that prioritize sustainability and ethical practices. Companies with strong ESG practices tend to have better risk management and more sustainable business models, and they can attract loyal customers and employees. – Bob Chitrathorn, Wealth Planning By Bob Chitrathorn of Simplified Wealth Management
9. Establish Measurable Goals
ESG-focused investments enhance portfolio performance by reducing risks and ensuring business sustainability over generations. Companies with strong ESG practices adapt better to regulatory, environmental and social changes, creating stable, long-term returns. To prepare, businesses should embed ESG principles, focus on transparency and set measurable goals, building resilience. – Amit Jain, Dhruva Advisors (USACFO)
10. Adopt GRI Or SASB Frameworks
ESG-focused investments reduce long-term risk by addressing resource scarcity, regulatory shifts and social expectations while driving performance through consumer and investor trust. As markets prioritize sustainability, ESG is the future, aligning profitability with impact. Companies must adopt frameworks like GRI or SASB, set measurable goals and embed ESG to stay competitive and resilient. – Trixy Castro, TRX Capital
11. Support Investor Preferences
As investor preferences shift towards more sustainable and responsible investments, companies with strong ESG practices may benefit from increased investor demand and higher valuations. – JD Morris, RHC 21 LLC (a SPE Fund) with family of Special Purpose Entities (SPE or SPV)
12. Integrate ESG Metrics
ESG-focused investments enhance portfolio stability by reducing exposure to environmental and governance risks while capturing sustainable growth opportunities. Companies should prepare by integrating ESG metrics into decision-making, fostering accountability and staying ahead of regulatory trends. – Sumeet Grover, Alliant
13. Communicate Progress To Stakeholders
ESG investments can reduce downside risks while uncovering new growth opportunities. They help avoid issues like regulatory fines or reputational damage and often lead to more stable returns. To stay ready, companies should embed ESG into their business models, set clear goals and communicate their progress effectively to investors and stakeholders. – Michael Foguth, Foguth Financial Group
14. Leverage Life Insurance
ESG-focused investments can stabilize portfolio performance by reducing risks tied to governance or environmental issues. Companies should better prepare by using life insurance as an asset class, leveraging tax-deferred growth and income-free use of cash value and providing liquidity to offset ESG risks while aligning with sustainable goals for resilience. – Andre Pennington, Pennington Law
15. Avoid Greenwashing
ESG practices actually predate the term itself. Corporate social responsibility, strong governance and energy efficiency have long been valued. Investing in companies with such practices helps reduce risk. Recently, however, there has been a rise in greenwashing, where ESG is simply used as a branding tactic. Investors should stay away from projects with such practices. – Lechi (Richard) Zhang, Stonelake Capital
16. Provide Transparent Reporting
ESG-focused investments can boost portfolio performance by driving sustainable growth and reducing risks like regulatory fines or reputational harm. They provide stability in volatile markets. Companies should prepare by integrating ESG into their operations, enhancing transparency in reporting and addressing key environmental, social and governance challenges to meet stakeholder expectations. – Ravi Gullapalli, Fastra Investments
17. Implement Accountability Structures
ESG-focused investments strengthen portfolios by aligning value creation with global sustainability imperatives. They reduce exposure to systemic risks while driving innovation and unlocking new market opportunities. Companies should adopt tailored ESG strategies, leverage data analytics to assess progress and establish accountability frameworks to achieve measurable impact and confidence. – Anushree Jain, Titan
18. Highlight Your Dedication To Sustainability
Investing with an ESG focus helps portfolios by reducing risks like regulatory challenges and reputational issues while capitalizing on opportunities in sustainable markets. To better attract investors, companies should integrate ESG factors into their strategies, enhance reporting and demonstrate a clear commitment to sustainability for stronger competitive positioning. – Ivan Lunegov, Olimp Capital Partners
The information provided here is not investment, tax, or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
