How Does ESG & SRI Affect YOU?

Two acronyms, ESG & SRI, might not mean that much for many investors but for some investors – Hey, Millennials!! – it might mean a world of difference in the equities they choose.  Do you “eat clean” or adhere to a vegan lifestyle?  Maybe you’re a “gym rat”, practice yoga or run marathons?  Have a cause; Cancer research, smoke-free, support lightening the marijuana laws, part of the LGBTQ community, believe in palliative care, environmental sustainability, clean oceans, worsening climate conditions, etc.  The list could go on, and on and on …

Environmental, social and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments. Environmental criteria consider how a company performs as a steward of nature. Social criteria examine how it manages relationships with employees, suppliers, customers, and the communities where it operates. Governance deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights.[1]

Socially Responsible Investing (SRI) involves investing in companies that promote ethical and socially conscious themes including environmental sustainability, social justice, and corporate ethics, and fight against gender and sexual discrimination.[2]

At the present time sustainable investing is slow moving, at about 12% in the U.S. but it is expected to grow to approximately 58% within five years.  Europe has integrated this type of investing into portfolios for quite a while now.  The U.S. is positioned to follow as, “Companies that consider environmental, social and governance issues tend to outperform because they think about the inter-linkage between all of these issues and their profitability.”[3] 

ESG factors are increasingly being assimilated into our way of thinking.  As example, some investors won’t buy into Walmart supposedly due to the way the workers are treated.  Then there is the recent IPO, Beyond Meat.  “At Beyond Meat, we believe there is a better way to feed the planet. Our mission is to create The Future of Protein® – delicious plant-based burgers, sausage, crumbles, and more-- made directly from simple plant-based ingredients.”[4]  The IPO was offered on May 2 at 45.  By the end of the trading day it reached 65; it has been as high as 201 and is currently in the range of 169.

Some skeptics ask whether investors are actually interested in sustainable investing.  Is it a fad?  Many believe it is the future of investing.  ESG factors can be used in your evaluation of a company.  Whatever your cause or pet peeve may be, your trusted advisor will be able to guide you into those equities that adhere to your sensibilities.

 

[1] Chen, James. “Environmental, Social, and Governance (ESG) Criteria.” Investopedia, Investopedia, 10 May 2019, www.investopedia.com/terms/e/environmental-social-and-governance-esg-criteria.asp.

[2] “Socially Responsible Investing (SRI).” Investopedia, Investopedia, www.investopedia.com/socially-responsible-investing-4689738.

[3] Chen, James. “Environmental, Social, and Governance (ESG) Criteria.” Investopedia, Investopedia, 10 May 2019, www.investopedia.com/terms/e/environmental-social-and-governance-esg-criteria.asp.

[4] “Beyond Meat - The Future of Protein™.” Beyond Meat - The Future of Protein™, www.beyondmeat.com/.

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