There are several approaches which traders can make use of when trading CFDs and other instruments. As a matter of fact, every trader tries to incorporate one’s image and personality when applying these approaches in the market or trade. We all know that there are several kinds of merchandise in the market but in several cases, traders pick approaches that make them look genuinely concerned for the welfare of the people and the environment. Trading for these individuals does not merely concern money matters but the safety of humanity too. Today’s article is intended for traders with a heart for the welfare of other people and the environment. We bring you rules that are intended when trading with the consideration of environmental, social, and governance factors.
The ESG Approach
For traders who wish to have a positive image while transacting money matters in the market, picking their merchandise using the Environmental, Social and Governance Criteria will help them fulfill both their goal as a profit earner and an environmental advocate. How is the ESG approach done? Let us tackle each element in the acronym in order to understand how the approach works. E stands for Environmental. For a CFD trader who is into at the same time living the life of an Environmental advocate, he is expected to transact with traders or companies that do not contribute to the destruction and pollution of the environment. S is for Social, and when we say social, it is pretty obvious that we are talking about the welfare of human beings and their rights. This is not to badmouth the market but it is an established fact that because of everyone’s freedom to trade, there are individuals who can easily get high profits through their involvement with illegal activities. An ESG advocate does not do that. As a socially concerned trader, he is expected to avoid investing in companies that manufacture weapons or actively seek out companies with above-average labor standards. The last element in the acronym is G. G means Governance, as someone who is looking after the welfare of everyone, an ESG follower also considers looking at the background of a company in terms of governance. He never or purchases stocks or shares from companies that do not fairly compensate their employees and shareholders.
The Advantage and Disadvantage of the Approach
Now that we have discussed the approach itself, it is about time that we teach you how to apply this approach in your trade by looking at its pros and cons.
There are several advantages that the ESG approach can bring you especially when applied to investing and trading CFDs. One good effect of the approach is its ability to let you trade in areas where you find yourself comfortable. Next is you are able to feel like an undiscovered good Samaritan when you trade with companies that meet the ESG criteria.
Every approach has their respective risks along with their advantages. In the case of ESG, a trader or investor is bound to face the challenge of portfolio diversification because of thorough research and screening that needs to be done before entering or closing a deal.
There is a famous cliche which says that money is the root of all evil but an ESG practitioner can prove this wrong. As an ethically concerned individual, the ESG approach is an effective move to make the people realize that one can both enjoy doing good as they do well in the market.