Should You Consider ESG Investing?

Socially responsible investing has been on the upswing in recent years. Investors that are looking to diversify their portfolios are fully on board with this sector of sustainability. When we think of earlier iterations of initiatives or movements that are defined as “sustainable”, there is usually a lot of gray area because of how broad it is. ESG (environmental, social, and governance investing) is paving the way for this changing landscape. It relies on specific criteria to grade investments, which goes further to clarify what sustainability should look like.

The great thing about investing is that investors have the freedom to invest in all kinds of movements that speak to them on a personal level. The ESG sector is so diverse and covers a host of topics that many of us are passionate about. The financial returns from these ventures can pay dividends for you and your families that are seeking to secure intergenerational wealth while simultaneously fighting for a cause that shapes the fabrics of society. 

With that in mind, like with all other investments, you should do your due diligence when researching which sectors of ESG are viable for you to invest in. Additionally, coordinating with a qualified financial planner in CT will give you further insights into managing your portfolio and allocating your assets in an appropriate and efficient way.

ESG Investing: The Benefits & What to Know

When covering topics on this blog, we like to emphasize the correlation of ESG investing and its impact on value creation. ESG is fair game for investors of all ages, especially the younger generation who have shown much interest in environmental, social justice, and governance issues. Since there is a lot to learn in this field of investing, you should look into the umbrella of ESG, the topics it covers, and how your personal investment will serve the well-being of you and your loved ones for years to come. Our approach to financial planning is more holistic in nature and if done right, achieving that upper echelon of financial freedom or “financial therapy” with a qualified financial planner in CT, will allow you to prioritize the other tasks and responsibilities in your life.

Simply put, ESG investing is a form of sustainable investing that looks at environmental, social, and governance elements to assess financial returns and the impact that it has. A component of financial therapy will definitely include the subject of ESG investing. The onslaught of the pandemic caused many to reevaluate their portfolios to determine what decisions they should make moving forward, to ensure that they retain their financial wellness. 

Thankfully, ESG investments and stocks are more resilient than most had anticipated. An analysis conducted by Morningstar showed that 66% of ESG funds in Mid-March were ranking in the top half of their categories. Rest assured, any reservations that were once held about the future of ESG are virtually irrelevant, due to what the data is indicating about its growth and popularity. In 2020, The Guardian reported that the cost of solar power is greatly dropping, thus urging energy firms to mothball coal plants in response to that dramatic price reduction. It is no surprise then that ESG funds are experiencing renewed interest.

Socially responsible investing is enticing for not only turning a profit, but it speaks volumes for employees who are looking to align themselves with an organization that embodies the same values for sustainability.

Should you look into ESG investing? The answer is yes. These types of investments are trending in the right direction and it won’t be long before many other organizations begin to adopt these principles and opportunities for ambitious investors. There is a lot to evaluate, and speaking with a qualified financial planner in CT will help you in making informed decisions for your financial health and wellness. 

ESG Investing Opportunities for The BIPOC Community

The landscape for ESG is appealing for many people, and it’s looking likely that those in the BIPOC community will get a piece of the pie as well. Back in 2018, the NAACP announced the launch of the “Minority Empowerment Exchange Traded Fund”, which ranks companies on the S&P 500 based on their level of commitment to diversity and inclusion. It will hold corporations accountable through market-driven approaches. OpenInvest, The Kellogg Foundation, and the Ford Foundation, are a few companies that have adhered to these protocols. 

The future looks bright and the societal emphasis that has been imposed on many of these corporations will surely open up discussion for investing that is focused on anti-racism initiatives. The push for racial equality will cause a variety of companies to create meaningful change. As we all know, words are just words. The actions that come out of these promises are what will drive change for everyone involved.

In summary:

• ESG is a sustainable form of investing that measures a variety of topics within environmental, social, and the governmental areas of society

• Allows investors to invest in causes that they are passionate about.

• Will pave the way for BIPOC members who are looking to invest in ESG stocks, thanks to the creation of acts like the “Minority Empowerment Exchange Traded Fund”

Financial Planner in CT

ESG investing will continue to attract many investors from all walks of life. If you’re interested in learning more about these investment opportunities and how to properly introduce them into your financial plan, you can contact Armah Financial Services today to set up a time to speak.

ESG investing in the energy sector

In the early 2000s when renewable prices - solar and wind - did not make economic sense, most of the investment discussion around energy investing were centered on coal, oil and gas, and to some extent nuclear. As renewable prices became more competitive through various legislations, coal became a target. I remember so well when during this time any transaction that supported coal was stopped in its tracks at our investment committee.

Coal is no longer the favored child. Nuclear plays its role when it is needed. The attention has shifted in the past decade to renewables although oil and gas prices are relatively cheap. One will think that anything renewable - from tidal energy to solar - should be accepted. That is, however, not the complete story.

Investors are looking at the energy sector and are asking questions such as what are are the environmental attributes of the project? What are the social or societal impact of the project? What governance structures are governing the project?

Globally, these factors, E - Environmental, S - Social and G - Governance are being used to evaluate energy projects and investments and it is important that those of us who happen to manage assets understand the dynamics at play. ESG is not just for the millenials.