Invest in Sustainability for the money, and do well by doing good.
...a 45 second read
People sometimes ask me, “should I invest in environmentally responsible funds or should I ignore those concerns and simply focus on performance?”
Well, there's good news: new research suggests you don't have to choose! My sustainable funds are doing great, and I expect more of the same.
...and it makes sense, doesn't it? Especially with a new, more environmentally progressive administration.
Think about it: a company that already has a low environmental impact should thrive in the future economy when tighter regulations (not to mentions consumer sympathies) emerge, right?
That's what I've been thinking for years now, and now the numbers are coming in (and I get to say "I told you so").
Financial research giant Morningstar has released some really good news for current and want-to-be ESG investors.
When the pandemic emerged in March 2020, stock markets experienced a sharp downturn. But for the last 9 months environmentally & socially responsible, aka ESG, investments have done much better than the market average.
Some of us (myself included) have been predicting this but the new research not only gives me an I-TOLD-YOU-SO soapbox to shout from, but also shows us why ESG prospects may look better in the future.
Why did we expect this? Because socially responsible businesses take into account more than short-term profits. And because they look long-term, they may be better prepared when things (like climate, like governmental policy) change.
Some of this outperformance during the pandemic can be attributed to the fact that ESG [link three to blog about definitions] funds generally avoid investments in oil and gas companies due to their adverse environmental profile.
Want to make sure that (at least some of) your money is being used ethically and socially responsible? Give us a call and we can help you. Have a different question? We can help with those too.
* Environmental, Social, and Corporate Governance (ESG) refers to the three central factors in measuring the sustainability and societal impact of an investment in a company or business.
1: Morningstar. Sustainable Funds Weather the First Quarter Better Than Conventional Funds. July 2020 https://www.morningstar.com/articles/976361/sustainable-funds-weather-the-first-quarter-better-than-conventional-funds
2: Morningstar. Investors Back ESG in the Crisis. May 2020.
3: Morningstar. Despite the Downturn, U.S. Sustainable Funds Notch a Record Quarter for Flows. April 2020.
4: Morningstar. Global Sustainable Fund Flows. July 2020.
5: Morningstar. Sustainable Funds Continue to Rake in Assets During the Second Quarter. July 2020.