Recently, more and more people are discussing ESG investing, but few truly understand what ESG is. I think it's necessary to have a good conversation about this topic.

ESG is actually an abbreviation for Environmental, Social, and Governance. In simple terms, it evaluates a company's sustainability through these three dimensions. Rather than just an investment strategy, it's more of a shift in investment philosophy—you not only look at how much a company can make, but also how it makes that money.

You might ask, why define ESG, and why care about these? The reason is simple. Traditional investing only looks at financial data, but ESG investors focus on long-term risks. A company that neglects environmental protection will eventually face regulatory risks; a company with high employee turnover and internal corruption won't go far in the long run. So, ESG is actually helping you avoid hidden risks.

How is the ESG score calculated? For the environment, it looks at pollution emissions, green energy agreements, deforestation, waste management; for social aspects, it considers gender diversity, human rights, employee satisfaction, data security; for governance, it examines board diversity, executive compensation, legal disputes, political donations. These indicators combined can give a company an ESG score.

Companies like Microsoft, Wanhui Logistics, and Mastercard have good reputations in ESG and stable financial performance, making them typical high-quality ESG companies.

If you want to start ESG investing, I suggest a five-step approach. First, choose your investment direction—whether to invest in companies that do good (like clean energy) or avoid those you consider harmful (like fossil fuels). Second, clarify your focus area—since ESG is broad, you need to narrow it down, such as only focusing on clean energy or corporate governance. Third, decide on the allocation ratio—beginners can start with 10% or 20%, it doesn't have to be 100% ESG. Fourth, select specific investment products—stocks, funds, or ETFs—based on your risk preference. Finally, regularly monitor performance—if it consistently underperforms the market, you need to reassess.

A practical issue to mention—ESG investing had a poor reputation in its early days mainly because returns were not ideal. But the situation has improved, and many ESG funds now outperform the market average. The key is to do thorough due diligence to find investments that align with your ESG principles and also offer good returns.

Another point to note—if you plan your retirement with ESG funds but their long-term returns fall short of expectations, even the best investment philosophy can't save your retirement plan. So, the best approach is to consult a professional financial advisor to find a balance between ESG investing and traditional investing, so you can stay true to your beliefs while achieving your financial goals.

In summary, ESG investing is a way of redefining corporate value—not just focusing on profits, but also on a company's contributions to the environment, society, and governance. This investment philosophy is becoming more mainstream and increasingly important.