Environmental, social, and governance (ESG) investing urges corporations to function in an ethically responsible manner, and interest is growing in this area.

Ethics and a duty to protect human lives are crucial elements to any medical profession. Physicians are trained to function within the framework of ethical decision-making, and some are interested in broadening this view beyond the medical field and into the realm of investing. Ethically driven investing takes shape as socially responsible investing, otherwise known as environmental, social, and governance (ESG) investing. According to Investopedia, ESG investing involves urging corporations to function in an ethically responsible manner, and it has seen an uptick in interest over the last few years.

According to Anjali Jariwala, CPA, CFP, of FIT Advisors, socially responsible investing limits potential investment options to those that follow specific social or moral tenets, thereby excluding certain companies, sectors, or sometimes entire countries. Jariwala also refers to “impact investing,” which involves sustainable investments that focus particularly on companies committed to climate change and environmental protection, encouraging corporations to act sustainably and responsibly. Thus, when considering physicians who are focused on climate change, Jariwala uses sustainable funds, noting that the more adept one is at understanding impact investing, the more one can discover investments that are tied to specific issues.

Crediting millennials with driving the shift to impact investing, Jariwala notes that with each year millennials gain wealth, impact investing gains popularity. What’s more, impact investments yield good or better returns. Putting money into impact investments allows physicians to align their ethical views with their monetary investments. However, impact investing is not without its limitations. According to Jariwala, a data gap exists within impact investing, due to feeble reporting on the topic. This, in turn, makes analyzing which would be the most profitable investment a bit challenging. To manage the data gap, Jariwala suggests reading the prospectus to gain a stronger grasp of an investment’s inner workings. Jariwala also points out another option: investing in Certified B Corporations. Companies obtaining this certification must undergo a strict process that measures their social and environmental impact.

Thrive Retirement Specialist Anthony Watson, CFA, CFP, points out that any physician who is considering ESG as an investment option must run through a cost-benefit analysis. He notes that physicians may choose to measure the worth of an ESG investment based on whether they feel that a particular investment’s issue is worth the financial expense. Despite the well-meaning intent of socially responsible investing, Watson urges physicians to approach with realistic expectations, as he has yet to see solid evidence that ESG investments outperform others.