Q: I’ve been wanting to understand more about ESG Investing or Sustainable Investing. Where can I go to find some information?
A: The timing of this question is perfect with Earth Day coming on Saturday, April 22. Celebrate by taking the day to get outside, enjoy nature, and consider your role in your community…and to learn more about ESG Investing.
We all want to make small changes to make the world a better place, and some of these changes can take place through your investment portfolio! This article discusses Environmental, Social, and Governance (ESG) investing (often referred to as Sustainable Investing), how to get started, and the difference it can make for both your investments and the environment.
Discover ESG Investing
ESG investing is a strategy that allows investors to build a more ethical portfolio. ESG investments are very strict in what they include, and the criteria determining this classification are directly tied to a company’s structure and performance rather than personal values.
Here are some factors that are considered by each category:
Environmental
- Carbon emissions
- Air and water pollution
- Water usage
- Fossil fuel/green energy usage
- Deforestation
Social
- Employee diversity
- Customer satisfaction
- Employee protection
- Sexual harassment and protected class policies
- Fair labor practices
- Human rights
Governance
- Board member diversity
- Lawsuits
- Lobbying
- Executive salaries
- Conflicts of interest
- Shareholder rights
Investments can have an ESG score that determines how well they adhere to the given guidelines and consider the above factors.
The Rise of ESG Investing
Although the jury is still out as to whether or not ESG investments outperform non-ESG investments, ESG investments have become more and more popular for investors over recent years. In fact, a recent report predicts that ESG-oriented assets under management will more than double to $10.5 trillion by 2026.1,2
Plus, the diverse availability of different ESG investment funds may fit more directly with your values. For example, you can invest in a company that is championing green energy initiatives or one that is working to become carbon neutral or even carbon negative.
How to Get Started with ESG Investing
If you’ve decided that ESG investing is aligned with your personal goals and values, it’s easy to get started.
The first method is to examine your portfolio and include ESG companies. You can find ESG investments that align with your financial goals, risk tolerance, and personal values by doing your research. ESG investments can include both individual stocks and mutual funds.
Another option is to work with a financial advisor who has experience with ESG investing. Look for an investor who believes in being a good global citizen through their business practices and the investment options they offer their clients.
From recycling and cutting out single-use plastic to cleaning up the streets, parks, and beaches by your house, there are many ways to get outside and celebrate Earth Day. 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.
Jeremy R. Gussick is a Certified Financial Planner™ professional affiliated with LPL Financial, the nation’s largest independent broker-dealer.* Jeremy specializes in the financial planning and retirement income needs of the LGBTQ+ community and was recently named a 2023 FIVE STAR Wealth Manager as mentioned in Philadelphia Magazine.** He is active with several LGBTQ+ organizations in the Philadelphia region, including DVLF (Delaware Valley Legacy Fund) and the Independence Business Alliance (IBA), the Philadelphia Region’s LGBT Chamber of Commerce. OutMoney appears monthly. If you have a question for Jeremy, you can contact him via email at [email protected].
Sources:
1https://www.forbes.com/sites/qai/2023/02/16/esg-stocks-what-is-esg-and-do-esg-stocks-outperform-the-rest/?sh=1befc3f47f36
2https://www.forbes.com/sites/joanmichelson2/2022/11/18/esg-investing-is-soaring-what-does-it-mean/?sh=19e283d351bc
This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.
Jeremy R. Gussick is a Registered Representative with, and securities and advisory services are offered through LPL Financial, a Registered Investment Advisor, Member FINRA/SIPC.
*As reported by Financial Planning magazine, June 1996-2022, based on total revenues.
**Award based on 10 objective criteria associated with providing quality services to clients such as credentials, experience, and assets under management among other factors. Wealth managers do not pay a fee to be considered or placed on the final list of 2022 Five Star Wealth Managers.