As an investor are you interested in integrating your values with your desire for making the world a better place? If so, sustainable investing might be a good fit for you.
Many terms have been used to incorporate moral values into investing such as sustainable, impact, socially responsible (SRI), and ESG investing which stands for environmental, social, and governance. This is a fast-growing arena that is rooted in evidence-based investing. This investment strategy has evolved significantly in the 30 or 40 years since the days of divesting from South Africa under apartheid. Today US SIF (The Forum for Sustainable and Responsible Investment) states in their 2018 Trends Report that total U.S. domestic assets under management that use SRI/ESG strategies have grown to over $12 trillion. ESG screens have not led to lower returns, and data show sustainability factors enhancing investment returns, rather than detracting.
ESG Investing Priorities
Let’s begin by discussing ESG investing which is a segment of the overarching sustainable investing. Different investors use ESG investing for various reasons. Typically, it is your own morals, values, and priorities that guide which approach is best for you.
Here are three common styles of ESG investing:
- Financial (Value) Priorities: Some investors may not focus on investing “morally,” but may if they believe companies with higher ESG rates will deliver higher returns.
- Impact (Value) Priorities: Other may not care if ESG investing translates to higher or lower returns, if they can invest in “good” companies.
- Blended Priorities: Most investors fall somewhere in between. They would like to not lose money and see returns while investing in a moral way.
Available ESG Investments
Overall, there are three main types of ESG investing, although there are a range of ESG investment opportunities.
1. Evidence-Based Investing: Fund managers typically use broad ESG integration (inclusion) strategies to complete the funds’ overarching goals and may engage in active ownership. By integrating evidence-based investing with ESG rating it should help investors:
- Solid portfolio construction such as asset allocation, global diversification, and cost control.
- Avoid less efficient strategies such as picking or avoiding specific stocks or sectors based on forecasts or popularity.
- ESG accountability as an overlay such as including the best-rated and excluding the worst-rated companies within your overall well-structured portfolio.
2. Socially Responsible Investing (SRI): SRI funds typically prioritize screening strategies ahead of evidence-based investing. This involves making security or sector-specific judgments or forecasts. This type of fund may appeal to someone who does not mind sacrificing some expected returns to better align investments with their personal values.
3. Impact Investing: Impact investors typically are on a mission to become an altruistic partner and not just invest. An impact investor’s highest priority is to fund a cause and has less regard for how the investment works out.
If you are looking to align your morals and values with your investments, contact us today! Copper Leaf Financial has access to the research and data required to help you successfully integrate sustainable investing into your existing portfolio. We don’t talk about ESG or sustainable investing because it’s the latest hot topic. We’re not following a popular trend. Every investment you make, every dollar you spend, every decision you make has impact and our aim is to help clients maximize positive impact and alignment with their personal values while striving to achieve their most important personal and financial goals.
Copper Leaf specializes in sustainable investing, or sustainable “planning” because it really includes alignment across your entire financial plan. Our goal is to help you achieve congruence and overall alignment between your values, your savings, investments, your charitable giving & philanthropy, and your community and lifestyle. A detailed, well-rounded, “big picture” plan can help maximize the wealth you share with future generations and causes most important to you.
Let’s get started! Call us today at (802) 878-2731 or click here to schedule a complimentary review of your current plan.
For more information about sustainable investing please review the white paper: “Sustainable Investing: From Niche to Normal”.
This material has been authored by a 3rd party and CLF makes no representation and takes no responsibility for the accuracy of the information presented.