Sustainable Investing – Does it have a place in your portfolio?
Sustainable Investing – Does it have a place in your portfolio?
Today’s investors are constructing portfolios that focus on both ESG criteria and long-term performance
Decades ago, so called ‘sin stocks’ (such as alcohol, gambling and tobacco companies) were the only way for investors to invest with their values. Over the past decade, that has change dramatically.
Today, sustainable investing, often referred to as environmental, social and governance (ESG) investing, is growing in popularity as investors are looking for companies that proactively reduce their impact on the environment, help their consumers live sustainably and govern their company responsibly.
As investors and consumers seek sustainability, companies are transforming their approach to solve some of the world’s challenges. Some changes are small like the shift from plastic to paper straws. Others are larger like the recent announcement from a Dutch court demanding Chevron act more quickly to reduce their greenhouse gas emissions. Investors response to these changes: in 2018, $12 trillion was invested in sustainable strategies in the U.S. alone representing a 38% increase from 2016.1
Sustainable investing not only allows investors to uphold their principles but also a way to prioritize their long term performance. According to a 2019 Morningstar report, ESG funds outperformed their conventional peers with 38% finishing in the top quartile of their category and 66% finishing in the top half. Sustainable investments are available across all risk profiles and asset classes allowing investors to enjoy the potential for long term performance, the ability to make a tangible difference in the world around them and the opportunity to express their own values.2
Has your advisor spoken to you about your values and how to align your portfolio accordingly? If you are interested in learning more about the growing number of ESG investment options, contact us today.
1U.S. SIF, The Forum for Sustainable and Responsible Investments 2018 Trend Report
2Global Sustainable Investment Alliance, 2018
Sustainable/socially responsible investing (SRI) considers qualitative environmental, social and corporate governance, also known as ESG criteria, which may be subjective in nature. There are additional risks associated with sustainable/SRI, including limited diversification and the potential for increased volatility. There is no guarantee that SRI products or strategies will produce returns similar to traditional investments. Because SRI criteria exclude certain securities/products for non-financial reasons investors may forego some market opportunities available to those who do not use these criteria. Investors should consult their investment professional prior to making an investment decision.
