What is ESG Investing?
An ESG portfolio is similar to a normal portfolio, except that a portion of the investment funds in the ESG portfolio are replaced by investment funds that track a similar index, but are more heavily weighted towards the stocks of companies with more favorable environmental, social, and governance practices. They also tend to exclude the stocks of companies in industries that have negative ESG impacts.
The Three Niches of ESG Investing
Environmentally responsible investing takes into account how companies affect environmental issues such as carbon gas emissions, pollution and water quality. ESG investing also seeks out companies that are utilizing clean energy and are leaders in innovating ways to mitigate our collective impact on the environment.
Socially responsible investing deals with issues that stem from how a company treats its customers, employees, and local community. There are a large number of social issues that ESG investing seeks to impact including good education, affordable housing, major disease treatment, human and labor rights violations, guns, and good health and nutrition.
Responsible governance investing means investing in companies with ethical and responsible leadership practices. It seeks to invest in companies with good policies around issues like executive compensation, corporate accounting practices, board independence and diversity, and shareholder rights.
Our ESG Portfolios
Anti - Deforestation
Good Health & Nutrition
Speak To Corporations in a Language They Understand
ESG investing lets you put your money where your mouth is. When you invest in an ESG portfolio whether it be Renewable Energy, Affordable Housing, or Anti-Deforestation, you make known to corporations the causes that you truly care about. Best of all, you make your passions known to them in their own language: dollars and cents.
Ok Great, But is it Profitable?
YES! In recent years consumer trends have been shifting dramatically to favor companies with good ESG practices. For example, SPDR S TR/SPDR S&P 500 FOSSIL (SPYX), is an ETF that matches the S&P 500 except it excludes the stocks of any companies in the fossil fuel industry. This ETF actually outperformed the regular S&P 500 index by 0.67% over a 4 year period, from 4/22/2016 to 4/21/2020. While past performance is no guarantee of future performance, this shows that it is becoming possible to invest responsibly and get a higher return while doing so!
How Did We Curate Our ESG Portfolios?
We built our ESG Portfolios with our core investing principles of using low-cost, diversified, highly liquid ETFs, but we also screened for ETFs with high ESG scores. We first screened thousands of ETFs to build the best all around portfolio possible from a performance and ESG perspective. This is now our General ESG portfolio. We then used ESG screening tools such as the non-profit As You Sow to further filter down our thousands of screened ETFs into portfolios centered around specific causes such as Anti-Deforestation and No Tobacco.