How to Invest in Alignment with Your Values: ESG Investing
Michael Baum, CFP®, RICP®
Vice President & Associate Financial Advisor
We all can make small changes in our everyday lives to help make the world a better place – even through your investment portfolio, by incorporating an Environmental, Social, and Governance (ESG) investment strategy.
Here's what to know about what ESG investing is, how it works and how to get started making ESG investments.
What is ESG investing?
ESG investing is a strategy that allows investors to build a portfolio made up of assets from companies that have been shown to adhere to strict ethical standards related to their environmental and social impact as well as their governance. Many investments have an ESG score that determines how well they adhere to these guidelines based on a variety of factors.
From the environmental perspective, those factors include things like the company’s impact on deforestation, carbon emissions, and air and water pollution, as well as how it uses water, fossil fuels, or green energy.
Social aspects considered in ESG investing include things like customer satisfaction, employee diversity and protections, sexual harassment and protected class policies, fair labor practices, and human rights issues.
Finally, from the governance standpoint, the factors considered include board member diversity and corporate conflicts of interest, as well as executive salaries and the company’s involvement in lawsuits or lobbying.
The Rise of ESG Investing
Not only can ESG investing be better for the environment and social justice, but it can also be great for investors. According to Forbes, ESG funds outperformed non-ESG funds based on annualized returns over the last 3, 5, and 10-year periods.1 ESG funds also outperformed non-ESG funds and the stock market in risk-adjusted returns.
It is no surprise that ESG funds have become more popular for investors of all backgrounds. According to Fast Company, investors poured about $120 billion into sustainable investments in 2021, more than double the $51 billion in ESG investments in 2020. About one-third of all assets contain sustainable investments.2
Additionally, the diverse availability of different ESG investment funds may fit more directly with your values, such as investing in a company that is championing green energy initiatives or is working to become carbon neutral or even carbon negative.
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How to Get Started With ESG Investing
ESG investing can be a lasting strategy to help you create a portfolio that reflects your values. As we grow as a global community and educate each other on ways to protect our planet, we will likely see an even more dramatic increase in ESG investing. If you’ve decided that ESG investing is aligned with your personal goals and values, there are a couple of ways to get started.
The first method is to examine your existing portfolio and do your own research to find ESG investments to add that align with your financial goals, risk tolerance, and personal values. ESG investments can include both individual stocks and mutual funds.
Another option is to work with a financial advisor or wealth management firm with experience in ESG investing. Look for an advisor or firm that acts as fiduciary (meaning they are required to act in your best interest) and who believes in being a good global citizen through their business practices and the investment options they offer their clients.
We’re proud to maintain a strong commitment to supporting environmental and social causes in alignment with our mission of helping others to “Live Well,” from assisting clients in making ESG investments to participating as a team in environmental clean-up events within our local communities. We believe that Living Well means living out your values and helping others realize new opportunities to live well, too.
If you’d like to learn more about our Plan Well, Invest Well, Live Well™strategic process and how we can put it to work to help you create an investment portfolio tailored to meet your goals and reflect your values, contact us at (860) 928-2341 or request a complimentary consultation now.
Investments are subject to risk, including the loss of principal. Environmental, social, and governance (ESG) criteria are a set of non-financial principles and standards used to evaluate potential investments. The incorporation of ESG principles provides a qualitative assessment that can factor heavily into the security selection process. The investment’s socially responsible focus may limit the investment options available to the investor. Past performance is no guarantee of future results.
Presented by Vice President, Associate Financial Advisor, Michael Baum, CFP®, RICP®. Securities and advisory services are offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. These materials are general in nature and do not address your specific situation. For your specific investment needs, please discuss your individual circumstances with your representative. Weiss, Hale & Zahansky Strategic Wealth Advisors does not provide tax or legal advice, and nothing in the accompanying pages should be construed as specific tax or legal advice. 697 Pomfret Street, Pomfret Center, CT 06259 and 392-A Merrow Road, Tolland, CT 06084. 860-928-2341. www.whzwealth.com.
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