How can you make a difference? You can make the biggest impact by investing in sustainable companies that help solve the world’s biggest challenges. It is about putting your dollars to work by buying products from and investing in companies that put the people and the planet first. Together we can create the momentum to encourage others to step up to the plate too.
A new and more diverse generation of investors are seeking sustainable solutions for their investment portfolios. The Millenial and Z Generations have greater access to the investment market. Moreover, the cost to enter the market has never been lower.
This lower barrier to entry means that you can invest with tens of dollars, instead of having to set aside thousands just to get started. The result, millions of new stock owners with sustainable ideals that companies cannot afford to ignore.
Socially Responsible Investing:
Socially responsible investing is known in the investment and ETF world as ESG (environmental, social, and governance) funds. More importantly, new sustainable ESG ETFs are cropping up and industry professionals are taking notice.
This is because investors, like you, are concerned with the future of the planet and the treatment of company employees. The public is beginning to speaking out and companies are having to adapt to their demands.
How can you join this movement? By supporting companies through the purchase of ESG stocks.
One of the greatest benefits of investing through an ETF is that you are able to diversify and own a wide range of EGS company stocks.
Both global institutions and individuals alike are taking a sustainable approach to pursuing their investment goals.
The thought used to be that you could only accomplish one goal (sustainability or profit) at a time. Today, statistics reveal that you can achieve both.
Benefits of Investing in Sustainable/Socially Responsible Companies:
According to investopedia.com, here are a few statistics on investing in socially responsible companies:
- In 2016, ESG made up over 20% of the $40 trillion money management market
- Companies that deploy ESG strategies tend to show higher return potential and are valued at a premium when compared to their peers
- Companies with higher ESG ratings tend to show higher profitability and dividend yield
- Most corporate executives believe that a sustainable strategy is needed to remain competitive
These statistics show that you can have “your cake and eat it”. There is a way to support socially responsible companies while growing your net worth.
ETF’s Create A Low Barrier to Entry:
Millennials are attracted to ETFs because of their price. For an annual fee, some as low as 0.04%, you can invest in hundreds of the top companies through an ETF.
Millennial investors’ love of doing their own research. Likely, this means that you want to be actively involved with the investment process.
There are a number of ways to incorporate sustainable investing into your portfolio.
Environmentally Friendly Socially Responsible ETF’s:
Jack C Bogle, the father of the ETF and creator of Vanguard, created a company that is arguably the king of low-fee fund offerings. Estimates for fees of U.S. funds are 87% lower than other funds with similar holdings. Likewise, estimates for international fund fees are 85% lower than traditional mutual fund offerings.
Vanguard recently launched two ESG ETFs. If you own a retirement account with Vanguard, like a Roth IRA, you can trade an unlimited number of their funds without paying a commission.
Typically, brokerages charge a flat dollar amount per trade e.g. Etrade charges $6.95 per trade (price checked on the day of this writing).
The funds incorporate elements of Socially Responsible Investing (“SRI”) by excluding certain “sin stocks”. Companies, such as those in the adult entertainment, alcohol, tobacco, fossil-fuel, and weapons industries are not included in the fund’s holdings.
From there, the funds apply an ESG overlay to the stock portfolios. The fund also attempts to maximize the United Nations Sustainable Development Goals in its investment decisions.
Another company that is offering ESG ETFs is called ishares.
This company evaluates and selects companies based on their commitments to positive environmental, social, and governance business practices. All iShares ESG funds screen out stocks involved in firearms, controversial weapons, and tobacco.
ishares has Thematic portfolios that focus on a particular E, S, or G issue. For example, clean energy or the diversity of a company’s workforce.
A few funds are specifically focused on investing in companies that have a low carbon impact. For example:
The iShares MSCI Global Impact ETF (MPCT) tracks an index of companies that “derive a majority of their revenue from products and services that address at least one of the world’s major social and environmental challenges as identified by the United Nations Sustainable Development Goals.”
The Take Away:
Today, investors have few excuses to avoid the inclusion of responsible investment holdings in their portfolios.
Evolving government policies are prompting large institutions around the world to put capital towards sustainable investments.
Moreover, investors like you are seeking sustainable investment solutions. The need for sustainable growth and investor’s desires to fund ethical companies has caused businesses to evolve for the better.
You can create an impact on how companies operate, by owning their shares. So get out there and be the change that you want to see in the world.
Want to learn more about how to save money by going green? Creating a diversified ESG portfolio?
The Increase Your Financial IQ Course will take a deeper dive into creating a personalized financial plan that will help you feel confident in your future. This course will cover other wealth building strategies in more detail, but for now, sign up for the FREE Increase Your Financial IQ Email Course for more information on financial planning and wealth creation!
Like what you see? Stay a while!
- How to Make Corporate Social Responsibility a Source of Opportunity
- Corporate Social Responsibility: A Company That Puts the Community and the Planet First
- How to Increase Corporate Social Responsibility
- How to Reduce Climate Change by Acting and Buying Green
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