What is ESG Integration?
According to the United States Securities and Exchange Commission (SEC), ESG Integration is an investment strategy that considers “one or more ESG factors alongside other, non-ESG factors in investment decisions.” “ESG” stands for Environmental, Social, and Governance criteria which form a framework for understanding a company’s relationship with ESG issues. “Integration” refers to the level of commitment to using ESG criteria in an investment strategy. The SEC, which regulates the US Securities industry, released a proposed rule on May 25th, 2022 that intends to bring clarity to the mass of ESG funds, investment products, and strategies now on the market. The proposal segments the spectrum of ESG investment strategies into three categories: ESG Integration, ESG-Focused, and a subset of ESG-Focused called Impact.