How Do You Feel About Your Investments?
When you invest your hard-earned money and assets, it is critical that you feel comfortable with your chosen companies, firms, or corporations. You are trusting them with your security and your future. So, do you believe in them? It may seem like a ridiculous question; but I feel your moral or ethical standards should be involved in your investment-related choices. Choose to support companies that perform the work or activities that you endorse. This kind of financial strategy is called, Environmental, Social, and Governance (ESG) investing. You may have heard of it by the name, Impact Investing, or Socially Responsible Investing.
ESG or Socially Responsible investing is becoming an increasingly popular way in which people support the companies that represent their own ideals. Articles from ThinkAdvisor and Barron’s reveal that ESG investing is rising in popularity amidst the current political climate. Additionally, a recent survey by Legg Mason indicates that 56% of millennials and 43% of high net worth investors would be interested in ESG investing. As more people become interested and engaged in it, consider the major benefits to using an ESG investment strategy for your present and future financial assets. Utilize this growing form of financial investing to make a real difference in the world around you.
Know Your Core Values & Companies That Act on Them
One of the most fundamental benefits to ESG investing is the variety of ways in which you can perform it. As with most aspects of investing, there is no correct or incorrect way to determine which companies align with your personally held values or beliefs.
The first step for any investor is to determine the motivations or causes that are most important to that person. These could be any of the following items:
- Community Outreach or Support
- Humanitarian Efforts or Global Charities
- Sustainable or Ecological Energy or Industrial Solutions
- Religious Systems or Faith-Based Missions
This list certainly does not include every possibility but rather some of the popular choices. Get more information on the motivations for ESG investing.
After you know the core values that you want to use to invest, choose the ways in which you want to socially responsibly invest. Your activities can be actively or passively performed. If you would like to impact the overall process of corporate dealings and communication, use the active approach to build a sustainable future. If your interests lie more heavily in the present state of corporations and the social atmosphere, use the passive approach to take action.
At this point: you must use a specific strategy to find the companies in which you will invest. Again, you have several choices – including the following:
- Positive Aspects – Using criteria to include those corporations or activities that meet your ESG standards.
- Negative Aspects – Using criteria that exclude entities as a function of their activities or practices.
- ESG Integration – Transforming your financial analysis to include important ESG standards or criteria. Morningstar has an example of how to rate the ESG level of companies.
- Impact Investing – Concentrating on acute issues within the immediate environment or society – often through private markets.
- Sustainability-Focused – Choosing companies, accounts, and activities that promote sustainability (List obtained from The Forum for Sustainable and Responsible Investment).
You have nearly complete autonomy and agency in your ESG investing. Decide how you will create a better future for the world as well as a prosperous financial situation for yourself and your family. Our financial advisors stand with you, every step of the way. Learn about all of your options.
Get Better Insight into Your ESG-Invested Companies
The implementation of additional criteria or standards into your financial analysis or strategy logically offers you additional information about the companies, corporations, or accounts that you examine. Therefore, ESG investing allows you to advantageously learn more about those companies than simply using basic or fundamental criteria for investments.
Use those added details and data as increased visibility towards the potential future of companies or accounts. Pax World Investments discusses several qualitative factors that can be revealed through ESG investing criteria:
- Comparative success or productivity between different companies within an industry
- Efficacy of leadership within an organization
- Corporations’ levels of risk tolerance.
With ESG investing: you not only contribute to the welfare of the surrounding environment or community. You also gain valuable information towards your own investment-related future.
Take Potential Opportunities for Financial Growth
Due to the added knowledge of companies that ESG investing offers, you have the opportunity to use that information to differentially increase or decrease your investments in those companies (Pax World Investments). For those that seem to have stability and potential for innovations, continue to invest your assets. For those that seem to barely meet criteria or face imminent decline, consider decreasing your invested amounts and devoting them towards other ventures.
In order to utilize this information, adjust your invested assets, and reap the financial benefits, you must have sufficient time to do so. This is yet another benefit of ESG investing.
Calvert Research and Management, as well as George Serafeim (Jakurski Family Associate Professor of Business Administration at Harvard Business School) and his Harvard Business School colleagues, report that ESG-related data takes significant time to integrate with stock prices on the market. This provides you with the opportunity to potentially gain alpha generation or increased returns. However, Calvert stresses that one must consider material ESG factors.
Making the decision to perform ESG investing gives you the benefit of potential financial growth through increased returns as well as the benefit of helping the world around you.
Feel Good About Your Socially Responsible Investments & Make the World a Better Place
Whether you are a high net worth investor that is concerned about the status of your portfolio or a millennial that wants to create solutions for your community, ESG investing is your solution. Start to create your financial future based upon the values that you hold, today. Contribute to the welfare of others and the environment by using special criteria and standards that select the companies that match your values and beliefs.
We have significant experience in ESG investment planning and strategies. Let us help you develop the investments that will suit you.
What’s Your Most Valued Cause?
Let us know about your social or environmental passion in the comments, below. Or, simply get in touch with our team of financial advisors to start your ESG investing.